First-Time Homebuyer in Austin? Here Are the Programs That Actually Put Money in Your Pocket

I had a buyer last year who almost walked away from a $380K townhome in Dripping Springs because she thought she needed $76K for a 20% down payment. She didn’t. She needed about $8,000 out of pocket after stacking two assistance programs and a tax credit. She closed 45 days later.

That’s not unusual. Most first-time buyers in Austin have no idea how much help is available. And I’m not talking about some obscure program with a 6-month waiting list. These are real, funded, active programs that lenders use every day. Lets walk through the ones that actually matter.

The Big Three: State Programs That Cover Most Austin Buyers

Texas has three statewide programs that do the heavy lifting. All three work with FHA, VA, and USDA loans. All three can be combined with local programs. And all three are available right now.

1. My First Texas Home (TDHCA)

This is the workhorse. The Texas Department of Housing and Community Affairs offers a 30-year fixed-rate mortgage with up to 5% of the loan amount in down payment assistance.

• How much: Up to 5% of your loan. On a $400K home with 3.5% FHA down, that’s $20,000 toward your down payment and closing costs.
• Format: Second lien loan. Terms vary by lender but typically deferred or forgivable.
• Income limit: About $103,500 for a family of four in the Austin area (115% of area median income). Single buyers have lower limits.
• Credit score: 620 minimum
• Catch: You must complete a homebuyer education course. It takes about 6 hours online. Not a big deal.
• Website: welcomehome.tdhca.texas.gov

2. Home Sweet Texas (TSAHC)

The Texas State Affordable Housing Corporation runs a similar program with one key difference: you can choose between a grant (free money, no repayment) or a forgivable second lien loan.

• How much: Up to 5% of the loan amount
• Grant option: Does not have to be repaid. At all. Ever.
• Forgivable loan option: Forgiven after 3 years if you don’t sell or refinance
• Income limit: Similar to TDHCA, varies by county and household size
• Credit score: 620 minimum
• Bonus: Their Homes for Texas Heroes program offers the same benefits to teachers, first responders, veterans, and healthcare workers
• Website: tsahc.org

3. Mortgage Credit Certificate (MCC)

This one is different. It’s not cash at closing. It’s a federal tax credit that saves you money every year you own the home.

• How it works: You get a tax credit of up to $2,000 per year based on the mortgage interest you pay. Not a deduction. A credit. Dollar for dollar off your tax bill.
• Duration: For the life of the loan, as long as you live in the home
• The math: On a $380K mortgage at 6.5%, you’re paying about $24,700 in interest the first year. The MCC gives you a percentage of that back as a credit. Over 10 years, that’s up to $20,000 in tax savings.
• Can be combined: Yes, you can stack this with My First Texas Home or Home Sweet Texas

Most lenders who work with TDHCA and TSAHC can issue the MCC at closing. Ask about it. If they don’t mention it, find a lender who does.

Austin-Specific Programs

City of Austin Down Payment Assistance

The City of Austin has its own program, and it’s generous:

• How much: Up to $40,000 in down payment and closing cost assistance
• Format: Zero-interest loan. Loans under $14,900 are forgiven after 5 years. Loans above that are forgiven after 10 years.
• Income limit: 80% or less of area median income (roughly $72K for a family of four)
• Purchase price limit: $579,250
• Website: austintexas.gov/homebuyer

The income limit is tighter than the state programs, so this won’t work for everyone. But if you qualify, $40,000 is significant. On a $400K home with FHA, your total down payment is $14,000. This program covers that and then some.

Travis County Hill Country Home DPA

This one covers all of Travis County, including Bee Cave, Lakeway, and the surrounding Hill Country communities:

• How much: 4%, 5%, or 6% of your loan amount
• Format: 0% interest, 10-year forgivable second mortgage
• Income limit: Up to 140% of area median income ($138,460). This is the most generous income limit of any program on this list.
• Credit score: 640 minimum (slightly higher than state programs)
• Purchase price limit: $364,452

That purchase price limit is the catch. At $364K, you’re looking at condos or smaller homes in the Austin metro. But in some areas of Travis County, that’s still doable.

The Stacking Strategy: How to Maximize Your Assistance

Here’s where it gets interesting. Most of these programs can be combined. Lets run the math on a real scenario:

$400,000 home purchase, FHA loan (3.5% down), buyer income $85K:

• Required down payment: $14,000 (3.5%)
• Estimated closing costs: $12,000 (3%)
• Total cash needed without help: $26,000

Now stack the programs:

• My First Texas Home DPA (5%): $20,000
• Mortgage Credit Certificate: $2,000/year tax credit
• Out of pocket: roughly $6,000 (plus the MCC saves you money every year)

If you qualify for the City of Austin program too (income under $72K), you could get an additional $40,000. At that point your out-of-pocket drops to nearly zero and you may even have funds left over for moving costs or a rate buydown.

Not every combination works for every buyer. Income limits, credit scores, and purchase prices all have to line up. But a good lender who specializes in DPA programs can run these scenarios in about 20 minutes.

What Counts as “First Time”?

This trips people up. In Texas, “first-time homebuyer” doesn’t mean you’ve never owned a home in your life. It means you haven’t owned a principal residence in the past three years.

So if you:

• Sold your home 4 years ago and have been renting? You qualify.
• Own an investment property but rent your primary residence? You may qualify.
• Went through a divorce and your ex kept the house? You likely qualify.

Veterans and active military get additional exceptions. And some programs waive the first-time requirement entirely in “targeted areas” (census tracts with below-median incomes). Parts of Austin qualify.

The Homebuyer Education Requirement

Every program on this list requires a homebuyer education course. I know it sounds tedious, but here’s the deal: it’s 6-8 hours online, it’s free or under $100, and it actually covers useful stuff like how escrow works, what to expect at closing, and how to avoid predatory lending.

More importantly, you can’t close without it. So do it early. Don’t wait until you’re under contract with a 30-day close and scrambling to check a box. Take the course before you start shopping. Framework and eHome America are both TDHCA-approved and fully online.

Common Mistakes That Kill DPA Applications

I’ve seen all of these:

• Not getting pre-approved with a DPA lender first. Regular lenders don’t always offer these programs. You need a lender who’s approved by TDHCA or TSAHC. Ask before you start.
• Making a large deposit or job change during underwriting. DPA loans go through the same underwriting as any FHA/VA loan. Large unexplained deposits or switching employers mid-process will delay or kill your file.
• Exceeding the income limit by $500. These limits are hard ceilings. If your household income is $104,000 and the limit is $103,500, you’re out. A good lender will run the numbers upfront.
• Forgetting about the purchase price cap. Some programs have maximum purchase prices. The Travis County program caps at $364K. Know the limits before you fall in love with a house you can’t use the program on.
• Waiting too long. Some programs have limited funding. TSAHC grants in particular can run out. Start the process early.

Ready to See What You Qualify For?

The programs are out there. The money is real. But it takes a lender who knows these programs inside and out, and an agent who’s walked buyers through the process before. I’ve helped dozens of first-time buyers in the Bee Cave, Lakeway, and greater Austin area navigate DPA programs. If you want to know what you qualify for and what the real numbers look like, reach out. Lets run the math together.

And if you’re still weighing whether 2026 is the right time to buy, the short answer is: with inventory up and sellers offering concessions, first-time buyers have more leverage right now than they’ve had in years. Don’t leave free money on the table.