Debunking Eligibility For DPA

State-wide and nonprofit down payment assistance programs aren’t far out of reach

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Senior Director of Single-Family Programs

According to a study conducted by Down Payment Resource and the Urban Institute, more than 30% of mortgage loan applications that are denied every year could have potentially been salvaged had the home buyer applied for down payment assistance. The same study revealed that a whopping 43.6% of single-family purchase loans are potentially eligible for down payment assistance. These aren’t numbers to ignore.

Texas currently has 78 active down payment assistance programs, offered through a combination of state and local government entities, nonprofit organizations and financial institutions. However, despite their widespread availability, many Texas home buyers are still either unaware of these programs or mistakenly believe they wouldn’t qualify.

The Texas State Affordable Housing Corporation, the state of Texas’ largest down payment assistance provider, is committed to changing these statistics. The organization, commonly known by the acronym TSAHC, was created by the Texas Legislature in the mid-1990s specifically to create homeownership opportunities for residents living in colonias along the Texas-Mexico border.

Now 30 years later, TSAHC is a robust statewide housing finance corporation that provides mortgage loans, down payment assistance, and mortgage interest tax credits to home buyers; bond financing and loans to affordable housing developers; and grants and training opportunities to local housing nonprofits. In 2023, TSAHC helped more than 11,000 home buyers purchase a home in partnership with a network of participating lenders and loan officers.

Program Types

TSAHC offers down payment assistance through two distinct programs: the Homes for Texas Heroes Home Loan Program and the Home Sweet Texas Home Loan Program. Homes for Texas Heroes is open to teachers, police officers, firefighters, EMS personnel, corrections officers, and veterans. Home Sweet Texas is not profession-specific, and is open to all eligible home buyers, regardless of their profession. Both programs offer a fixed-rate mortgage loan that includes down payment assistance of up to 5% of the loan amount. There is no first-time home buyer requirement for these programs.

However, first-time home buyers (defined as those who have not owned a home in the past three years) can also apply for a Mortgage Credit Certificate (MCC). The MCC is a dollar-for-dollar tax credit that allows home buyers to receive a portion of the mortgage interest they pay back as a tax credit when they file their federal income taxes every year. With an MCC, a homeowner can save thousands of dollars on their income taxes over the life of their loan.

Navigating the Various Assistance Types

Home buyers have varying wants and needs when it comes to mortgage financing, and what works for one may not work for another. TSAHC therefore strives to provide home buyers with a variety of financing and down payment assistance options. For example, home buyers can utilize an FHA, VA, USDA or conventional loan. They can also select the amount of down payment assistance they need (between 2-5 percent of the loan amount) and whether to receive the down payment assistance as a grant or 3-year deferred forgivable second lien.

However, because the assistance type selected affects their first-lien mortgage interest rate, home buyers must select the option that makes sense for their individual budget. This is where a good loan officer is key. TSAHC relies on its network of knowledgeable loan officers to explain the requirements, costs, and benefits of each assistance type to help home buyers determine which option is best for them.

“In 2023, TSAHC helped more than 11,000 home buyers purchase a home in partnership with a network of participating lenders and loan officers.”

How TSAHC Funds Its Down Payment Assistance

TSAHC funds its down payment assistance primarily through the packaging and sale of mortgage-backed securities in partnership with its master servicer Lakeview Loan Servicing. While assistance types and interest rates vary based on market conditions, under this structure, the down payment assistance funding source is unlimited and therefore not limited to budget approvals or bond authority.

However, TSAHC does periodically offer a special down payment assistance product funded through the sale of mortgage revenue bonds. This product typically offers a lower interest rate on the first-lien mortgage but is restricted to first-time buyers (again, defined as those who have not owned a home in three years) and is subject to funding availability.

Eligibility Requirements-Not as Restrictive as You May Think

One of the most common misconceptions about down payment assistance is that the eligibility requirements exclude most home buyers from applying. But in reality, the requirements are not so different from traditional mortgage loans.

To qualify for assistance from TSAHC, home buyers must have a minimum 620 FICO score and meet standard mortgage underwriting criteria. The only significant difference is that home buyers must meet specific income requirements, which can vary based on their county. The current income limits as of April 2024 for the major metro areas in Texas are as follows:

Houston: $116,500

Dallas: $128,875

Austin: $146,000

San Antonio: $119,960

El Paso: $112,625

The only other requirements are to apply through a TSAHC-approved lender and to complete an approved home buyer education course prior to closing on the home loan.

TSAHC offers an easy four-step eligibility quiz on its website to help home buyers determine if they meet the eligibility criteria and connect them with approved lenders and home buyer education providers in their area.

“Texas currently has 78 active down payment assistance programs, offered through a combination of state and local government entities, nonprofit organizations and financial institutions. However, despite their widespread availability, many Texas home buyers are still either unaware of these programs or mistakenly believe they wouldn’t qualify.”

Working with a prospective buyer you think may qualify? Loan officers and real estate agents also utilize the quiz to determine if their home buyers meet the eligibility criteria. TSAHC does not collect personal information through the quiz, so anyone can take it without fear of unwanted solicitations.

Using TSAHC Programs to Serve More Home Buyers

The current higher interest rates have made the assistance offered by TSAHC more important than ever. This is because down payment assistance can help increase the amount of cash available to close. When layered with an MCC, it can also improve a home buyer’s debt-to-income ratio because the loan officer can include the first-year tax savings in the buyer’s qualifying income. Together, these two factors comprise more than 42% of mortgage application denials, per the study conducted by Down Payment Resource and Urban Institute.

TSAHC also makes it easy to educate potential home buyers about its programs. Loan officers and real estate agents can order brochures free of charge on the website, as well as engage with educational videos and co-brandable collateral material that housing professionals can share with their clients.

TSAHC also has a TREC-approved continuing education course for agents that lenders can host to facilitate connections with agents and spread the word about down payment assistance.

How TSAHC Recognizes its Lenders

As an organization that serves all 254 counties in Texas, TSAHC relies heavily on its network of loan officers and real estate agents to educate home buyers about the assistance available to them.

TSAHC recognizes its top-producing mortgage companies and loan officers in a variety of ways. TSAHC has a web page dedicated to its top loan officers that is promoted via email and social media. Top loan officers are also invited to participate as members of TSAHC’s Lender Advisory Council, which offers unique opportunities to provide feedback on TSAHC’s programs and participate as subject matter experts on TSAHC’s podcast.

TSAHC also invites its top loan officers to become certified to teach its continuing education course for REALTORS and represent TSAHC at various home buyer and community events.

But loan officers don’t have to be one of the top loan officers to receive recognition and support. Loan officers who close at least four TSAHC loans annually can also create a profile on TSAHC’s Find a Lender website tool to receive free referrals. Home buyers are connected to this tool when they complete the eligibility quiz.

Together, these opportunities enable TSAHC to spread the word while also connecting potential buyers with the loan officers most knowledgeable about the programs.

How to Sign Up as a Lender

Loan officers interested in participating in TSAHC’s programs should first determine whether their mortgage company is approved to participate. A list of participating mortgage companies is available on TSAHC’s website.

Signing up as a participating mortgage company is a two-step process. First, the mortgage company must be approved as a correspondent lender by TSAHC’s master servicer Lakeview Loan Servicing. Once approved, the mortgage company must submit the application and participation agreements directly to TSAHC staff.

Loan officers can access TSAHC’s on-demand training portal once their mortgage company is approved to participate. Upon completion of all required training, loan officers will receive log-in credentials to TSAHC’s lender portal and may begin reserving TSAHC loans.