If you're buying your first home in Austin in 2026, there's money on the table most buyers leave behind.
Texas offers multiple down payment assistance programs, tax credits, and grant options — funded by the state, not private lenders. These programs are real, currently funded, and available to qualified first-time buyers right now.
The problem isn't that the programs don't exist. It's that most buyers hear about them from the internet six months too late, or their lender never brought it up.
This is the rundown. What's available, how each one works, and how to stack them.
The Two State Agencies Running These Programs
Almost every Texas first-time buyer program flows through one of two agencies:
- TSAHC — Texas State Affordable Housing Corporation. Runs the Home Sweet Texas and Homes for Texas Heroes programs. Focus: down payment assistance.
- TDHCA — Texas Department of Housing and Community Affairs. Administers the My First Texas Home program and Mortgage Credit Certificates. Focus: DPA loans and tax credits.
Both agencies work through approved lenders — not directly with buyers. You can't apply online and fund your own loan. You need a lender who is certified to originate these programs. Not all lenders are.
TSAHC — Home Sweet Texas & Homes for Texas Heroes
TSAHC is the most commonly used first-time buyer program in Texas. Here's how it works:
Who qualifies
- First-time buyers (no home ownership in the past 3 years) — or buying in a federally designated target area
- Income at or below TSAHC's county-level limits (varies by area and household size)
- Purchase price within TSAHC's current limits for your area
- Minimum 620 credit score (some programs require 640+)
The Homes for Texas Heroes version has expanded eligibility for teachers, firefighters, police officers, corrections officers, EMS personnel, veterans, and active duty military. If you're in any of those categories, start here.
What you get
Down payment assistance of 3% to 5% of the loan amount, structured as either:
- Grant — true gift, no repayment ever. Comes with a slightly higher interest rate on your first mortgage.
- Deferred second lien — repaid when you sell, refinance, or pay off the first mortgage. Comes with a lower interest rate on your first mortgage.
Most buyers choose the grant because the simplicity outweighs the rate difference. But run the math. If you're planning to stay 7+ years, the second lien structure can be cheaper overall.
Compatible loan types
TSAHC DPA works with FHA, VA, USDA, and conventional loans. The most common pairing in Austin is FHA + TSAHC grant — the 3.5% FHA down payment is fully covered by the DPA, so you're closing with little to nothing out of pocket for the down payment.
TDHCA — My First Texas Home
TDHCA's My First Texas Home program is similar to TSAHC but with some differences:
- DPA of up to 5% of the loan amount as a 30-year deferred, zero-interest second lien
- First mortgage at a competitive fixed rate
- Income and purchase price limits apply (generally more restrictive than TSAHC in high-cost areas like Austin)
- Works with FHA, VA, USDA, and conventional loans
TDHCA is also the issuing agency for Mortgage Credit Certificates (see below). You can combine the My First Texas Home DPA with an MCC — that's one of the best stacking strategies available.
Mortgage Credit Certificate (MCC) — The Tax Credit Most Buyers Skip
The MCC is the most underused first-time buyer benefit in Texas. Here's why it matters:
A Mortgage Credit Certificate is a federal tax credit — not a deduction. A deduction reduces your taxable income. A credit reduces your actual tax bill, dollar for dollar.
In Texas, an MCC lets qualifying first-time buyers claim up to 40% of their annual mortgage interest as a direct federal tax credit, up to $2,000 per year.
What that looks like in real numbers
Assume a $350,000 loan at 6.875%. In year one, you'd pay roughly $23,800 in interest.
- 40% credit = $9,520 — but the credit is capped at $2,000
- So you get a $2,000 federal tax credit every year for as long as you live in the home
- Over 10 years: $20,000 in tax savings
The remaining 60% of interest ($21,800 in year one) is still deductible on Schedule A if you itemize. The MCC doesn't eliminate that — it just converts 40% of it from a deduction to a dollar-for-dollar credit.
MCCs are issued through TDHCA-approved lenders. There's a one-time fee (typically $500) and the same income/purchase price limits apply.
City of Austin DPA — American Dream Program
The City of Austin runs its own down payment assistance program for buyers purchasing within Austin city limits. The American Dream Program offers:
- Zero-interest, deferred loans of up to 10% of the purchase price for down payment
- Additional assistance for closing costs
- Income limits tied to Austin Area Median Family Income (AMI)
- Targeted at low-to-moderate income buyers
The City of Austin program has stricter income limits than TSAHC — designed for buyers below 80% AMI. It's not for everyone, but for buyers who qualify it can stack on top of state programs.
Check with the City of Austin Housing Department for current funding availability — city programs can pause when funds run out mid-year.
How to Stack These Programs
The real opportunity is combining programs. Here's the most powerful combination available to Austin first-time buyers in 2026:
| Layer | Program | What It Covers |
|---|---|---|
| First mortgage | FHA loan (or conventional) | Purchase financing at competitive rate |
| Down payment | TSAHC grant (3–5%) | Covers FHA 3.5% down payment entirely |
| Tax benefit | MCC through TDHCA | $2,000/yr federal tax credit for life of loan |
| Closing costs | Seller concessions (negotiated) | Seller pays 2–3% of purchase price toward fees |
Done right, a first-time buyer in Austin can close a home with very little cash out of pocket — not zero (there are always some costs), but dramatically less than the 3.5–5% most people expect to bring to the table.
The "First-Time Buyer" Definition — It's Not What You Think
For Texas state programs, a first-time buyer is defined as someone who has not owned a primary residence in the past three years.
That means:
- You owned a home and sold it four years ago → you qualify
- You owned a rental property but never lived in it → you may qualify
- You're buying in a federally designated target area → the first-time buyer requirement is waived entirely
- You're a veteran → several programs waive the requirement for veterans
Don't assume you don't qualify. Many buyers who think they're not first-time buyers actually are under the program definitions.
What to Do Next
These programs are real and funded — but they require a lender who is certified to originate them. Not every lender participates. Some lenders don't bring it up because the programs require extra processing work and don't add to their margin.
If you're planning to buy in Austin in 2026 and you haven't owned a home in the last three years, start your pre-approval and ask specifically about TSAHC and MCC eligibility. I'll run both scenarios — standard and DPA — so you can see the actual dollar difference.
You can also read more about first-time home buyer options in Austin and Texas down payment assistance programs for 2026.
Find Out If You Qualify for DPA or an MCC
I'll run your numbers against current TSAHC and TDHCA program limits and show you exactly what's available in your price range.
Get Pre-Approved →Or schedule a 15-minute call to ask questions first.
Frequently Asked Questions
What is the TSAHC first-time home buyer program in Texas?
TSAHC offers two programs — Home Sweet Texas (open to all eligible first-time buyers) and Homes for Texas Heroes (for teachers, firefighters, police, veterans, and other public servants). Both provide down payment assistance of 3–5% of the loan amount as either a grant (no repayment) or a deferred second lien. Income and purchase price limits apply. You must use a TSAHC-approved lender.
Do I have to repay TSAHC down payment assistance?
Not if you choose the grant option — it's a true gift with no repayment required. If you choose the deferred second lien option instead, repayment is due when you sell, refinance, or pay off the first mortgage. The grant comes with a slightly higher rate on your first mortgage, so compare total costs over your expected hold period before deciding.
Can I use TSAHC assistance with an FHA loan in Texas?
Yes. TSAHC DPA is compatible with FHA, VA, USDA, and conventional loans. The most common pairing is FHA + TSAHC grant, which can cover the entire 3.5% FHA down payment. You'll still need to cover closing costs unless you negotiate seller concessions.
What is the Mortgage Credit Certificate (MCC) and how much can it save me?
An MCC is a federal tax credit — not a deduction — that lets qualifying first-time buyers claim up to 40% of their annual mortgage interest, up to $2,000 per year, directly against their federal tax liability. On a $350,000 loan, that's a $2,000 tax credit every year you live in the home. Over 10 years: $20,000 in savings. MCCs are issued through TDHCA-approved lenders and can be combined with DPA programs.
Who qualifies as a first-time home buyer in Texas for these programs?
Anyone who has not owned a primary residence in the past three years qualifies as a first-time buyer under most Texas state programs. Veterans are often exempt from this requirement. Buyers purchasing in federally designated target areas may also be exempt. Don't assume you don't qualify — the definition is broader than most people expect.
Can I combine multiple first-time buyer programs in Texas?
Yes. A common and powerful combination is TSAHC down payment assistance (grant) paired with an MCC tax credit through TDHCA. The grant covers your down payment; the MCC saves you up to $2,000 per year on federal taxes. Add seller concessions for closing costs and you can close with very little out of pocket. Your lender will tell you which combinations are allowed based on your specific loan type.