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Texas First-Time Homebuyer Programs

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Intro

When you’re planning to buy a home, there are a number of financial hurdles you need to clear, including saving for a down payment and closing costs. In fact, some borrowers who can afford a monthly mortgage payment struggle in their homebuying quest precisely because they can’t set aside the amount needed to put down and close.

Texas homebuyers will find assistance on both fronts, as there are programs offered through both the Texas State Affordable Housing Corporation (TSAHC) and the Texas Department of Housing and Community Affairs (TDHCA) that provide affordable loans as well as help with down payment and closing costs.

Texas first-time homebuyer programs

Most of the programs you’ll find in this guide apply to homebuyers across the state, regardless of profession. However, the Homes for Texas Heroes program offered through the TSAHC is exclusive to those working in fields such as teaching, law enforcement and emergency services (see complete list below). Homebuyer assistance in Texas targets low- to moderate-income homebuyers.

Eligibility for Texas assistance

Eligibility for Texas homebuyer assistance vary based on each program’s income and purchase price limits. All of the programs listed in this guide are statewide. However, there are city- and county-level assistance programs as well. Katie Howard Claflin, director of communications and development at TSAHC, noted that many city-level assistance programs can be combined with state incentives, further reducing borrowers’ upfront costs.

TDHCA announced in February 2019 that it will put $166.3 million toward low-interest loans and down payment assistance in the coming year. These funds will be distributed as part of the My First Texas Home program described below on a first-come, first-served basis. Applicants must have a credit score of 620 or higher and must be a first-time homebuyer, a veteran or purchasing a property in a federally designated target area.

Targeted areas include those that suffer chronic economic distress and qualified census tracts — areas in which half of the local households earn an income 60% less than the area median income (AMI). If you buy a home in a targeted area through the Homes for Texas Heroes Loan Program, you’ll be granted higher income and purchase-price limits.

Homes for Texas Heroes Loan Program

What is it?

  • A 30-year fixed rate
  • Offers up to 3%-5% in down payment assistance
    • May receive 3%-4% as a grant
    • Five percent may be taken as a zero-interest second lien repayable when you sell, refinance or transfer the home
  • Available to first-time and repeat homebuyers

Requirements

  • Exclusive to the following professions (among a few others):
    • Firefighters
    • Police officers
    • Corrections officers
    • Teachers
    • Nursing faculty member
    • Veterans
    • Emergency services personnel
  • Income limit capped at 115% of the area median income (AMI)
  • Minimum credit score of 620 required; requirement increases to 680 for borrowers who choose to take down payment assistance as a second lien loan.

How to apply

You can take TSAHC’s eligibility quiz to find out whether you’re eligible for the Homes for Texas Heroes Loan Program. Claflin said eligible borrowers should contact participating lenders who will walk them through the qualification and borrowing process.

Homes Sweet Texas Home Loan Program

What is it?

  • A homeownership program that may be used anywhere in Texas and for whichever type of home you choose.
  • Borrowers may take 3%-4% in down payment assistance as a grant.
  • Borrowers may take 5% in down payment assistance as a second lien or soft second, with 0% interest and no monthly repayment obligation. The second loan can be repaid when the borrower sells, transfers or refinances the home.

Requirements

  • Income limit capped at 115% of AMI
  • Minimum credit score of 620 required
  • Borrowers who choose to take down payment assistance as a second lien loan will need a minimum 680 credit score

How to apply

To find out whether you qualify for the Homes Sweet Texas Home Loan Program, complete the short eligibility quiz on the TSAHC website.

My First Texas Home

What is it?

  • A 30-year fixed-rate mortgage
  • Offers down payment assistance
  • Offers up to 5% in closing cost assistance
  • Borrowers statewide can use the program, provided they work with participating lenders
  • Applies to U.S. Department of Veterans Affair (VA), Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA), and Fannie Mae HFA Preferred
  • Can be combined with Texas Mortgage Credit Certificate (MCC) tax-incentive programs

Requirements

  • Must be a first-time homebuyer (or must not have owned a home within the past three years) or be a veteran
  • Minimum credit score of 620
  • Income limits apply and vary based on family size. Maximum income limit ranges are as follows:
    • For non-targeted areas: $68,800-$107,410
    • For targeted area: $82,560-$126,700
  • Purchase price limits also apply, based on the following schedule:
    • A single-family unit in non-targeted areas: $271,164-$355,764
    • A single-family unit in targeted areas: $331,423-$434,823
    • A duplex in non-targeted areas: $347,178-$455,432
    • A duplex in targeted areas: $424,329-$556,639
  • Homebuyer education course is required
  • Applies to the following property types:
    • Single-family units
    • Manufactured homes purchased with FHA loans
    • Duplexes (some restrictions apply)
    • Condos

How to apply

Contact a participating lender to determine whether you’re eligible for the My First Texas Home program.

My Choice Texas Home

What is it?

  • Down payment assistance
  • Offers up to 5% of the loan amount in closing cost assistance
  • Applies to Fannie Mae Preferred conventional loans, as well as VA, USDA and FHA loans
  • Cannot combine with MCC program

Requirements

  • First-time and repeat homebuyers are eligible
  • Minimum credit score of 620 required
  • Homebuyer education course is required
  • Income limits apply, based on location and family size. Maximum limit ranges are below:
    • $68,800-$107,410 for non-targeted areas
    • $82,560-$126,700 for targeted areas
  • Purchase price limits are based on family size and location:
    • Single-family properties in non-targeted areas: $271,164-$355,764
    • Single-family properties in targeted areas: $331,423-$434,823
    • Duplexes in non-targeted areas: $347,178-$455,432
    • Duplexes in targeted areas: $424,329-$556,639
  • May be used for the following property types:
    • Single-family homes
    • Manufactured housing purchased with FHA loans
    • Duplexes (some restrictions apply)
    • Condos

How to apply

To learn more about the My Choice Texas Home program, reach out to a participating lender.

Mortgage Credit Certificate (MCC)

What is it?

  • A tax credit of up to $2,000 per year, based on mortgage interest paid.
  • May be combined with the Homes for Texas Heroes or Homes Sweet Texas Home down payment assistance programs.
  • Applies to single-family homes, condos, townhouses and manufactured homes (some restrictions apply).

Requirements

  • Must be a first-time homebuyer (defined as not having owned a home within the past three years)
  • No minimum credit score requirement, provided you have fixed-rate mortgage loan not issued through the TSAHC
  • MCC applies statewide

How to apply

Both TSAHC and TDHCA charge a $500 issuance fee for the Mortgage Credit Certificate, plus a $200-$225 compliance fee that is also associated with the credit. The $500 fee is waived for borrowers using a My First Texas Home Loan or a Texas Heroes loan, but borrowers are still responsible for the compliance fees.

As of Feb. 1, TDHCA will only issue MCCs in combination with My First Texas Home Loans. The certificates will no longer be offered as a standalone product. However, TSAHC offers MCCs as standalone products, including to borrowers who did not use one of the agency’s products.

National first-time homebuyer programs

Working through the available programs to determine your eligibility may take a little time, but it could yield thousands of dollars in savings, particularly if you live in a Texas city or county that offers assistance programs.

You may qualify for additional savings through national programs, so incorporate these into your mortgage strategy as well. LendingTree, which is MagnifyMoney’s parent company, offers the following guide to national first-time homebuyer programs that may help you maximize savings on your journey to homeownership.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Casey Hynes
Casey Hynes |

Casey Hynes is a writer at MagnifyMoney. You can email Casey here

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Life Events, Mortgage

How Credit Report Disputes Can Sabotage Your Chance for a Mortgage

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

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Mortgage underwriting can feel like it’s taking a lifetime when it’s standing between you and your dream home. But your lender wants to make sure that you’ll be able to repay the loan, so they’ll take the time to go over your credit history with a proverbial magnifying glass.

Before you get to underwriting, you’ll want to make sure you’re a creditworthy borrower. This means maintaining a good payment history, paying down debt and disputing any errors on your credit report.

However, credit report disputes can impact your ability to get a mortgage if they’re still pending when you’re applying for a loan. This guide will explain how and why.

Why your credit reports and scores matter

One of the first things lenders look at is your credit report, which provides information about your credit history. It details whether you’ve made on-time payments on credit cards, loans and other accounts.

The information included in this report is summed up by a credit score that generally ranges between 300 and 850. The higher your score, the more creditworthy you are perceived to be.

Although credit scores aren’t the only factor that determines whether you’ll qualify for a mortgage, your credit score heavily influences the mortgage interest rate you receive. The highest scores qualify borrowers for the best mortgage rates.

Before you begin the homebuying process, it’s smart to review your credit report and have a copy handy. You can request a free credit report once a year from each of the three major credit reporting bureaus, Equifax, Experian and TransUnion, at AnnualCreditReport.com.

It’s critical to arm yourself with this information in advance. That gives you the opportunity to dispute any inaccuracies you’ve discovered and clean up your report.

What is a credit report dispute?

Credit report inaccuracies are relatively common. Inaccurate information can happen for a variety of reasons — a credit card payment being applied to the wrong account or duplicate accounts in your report giving the impression that you carry more debt than you actually do, for example.

Not only can errors harm your credit score, but they can prevent you from qualifying for a new credit account, such as an auto or home loan. That’s why it’s important to regularly keep track of the information found in your credit reports.

When you review your credit report and find an error, you have the opportunity to formally dispute it under the Fair Credit Reporting Act This is the first step to take to get the error corrected or removed.

Fortunately, it’s easier than ever to file a credit dispute with all three credit reporting agencies online.

How to file a credit report dispute

If you’ve found an error on your credit report, take the following steps to dispute it:

  1. Provide your contact information.
  2. Identify the items in your credit report that are inaccurate.
  3. Explain why you’re disputing the info and include documentation to support your dispute.
  4. Request a correction or deletion.

You’ll also want to reach out to the creditor that is reporting inaccurate information to the credit bureaus. Let them know you’re disputing the information and provide them the same documentation you’re giving to the bureaus.

In many cases, the credit bureaus investigate disputes within 30 days, according to myFICO.com.

However, many disputes can go unresolved for long periods of time, which can be troublesome for consumers applying for a mortgage. Many loan applicants don’t realize an open credit report dispute can raise a red flag to lenders and may even prevent mortgage approval.

When to file a credit report dispute

You’ll want to file a dispute as soon as you spot an error on any of your credit reports, but if you’re thinking about buying a home in the near future, it’s best to exercise caution when filing disputes, especially right before you apply for a mortgage.

Although the dispute investigation can wrap up in 30 days, it could last as long as 90 days, so it’s best to avoid filing new disputes a few months prior to starting the homebuying process.

How mortgage lenders view credit disputes

When a dispute is filed, credit reporting agencies are required to label the item as “in dispute.” The dispute itself doesn’t impact your FICO Score. However, your score may temporarily deflate or inflate while the disputed items are being investigated.

Mortgage lenders know credit reports with disputed items don’t paint the most accurate picture of a consumer’s creditworthiness and many require this status be removed before approving a mortgage application. This leaves some consumers with a difficult decision to make — accept costly credit report errors or delay applying for a loan until disputes have been resolved.

Here’s how lenders who provide conventional and FHA loans consider credit report disputes when determining whether a consumer qualifies for a mortgage.

Conventional loans

Both government-sponsored enterprises, Fannie Mae and Freddie Mac, have automated underwriting systems that alert lenders to existing credit report disputes. These entities don’t issue loans, but buy mortgages from lenders that follow their rules.

Fannie Mae’s system initially reviews all accounts on a borrower’s credit report, even those that are being disputed. If the borrower would be approved for the loan even with the account in question, the loan moves forward. But if the disputed account would push the borrower into the “rejection” category, the system will direct the lender to investigate whether the dispute is valid.

Lenders using Freddie Mac’s system are required to confirm the accuracy of disputed accounts. The borrower would need to have the accounts corrected before the loan can move forward.

FHA loans

FHA-approved lenders require borrowers with disputed delinquent accounts on their credit report to provide an explanation and supporting documentation about their dispute. If the account has an outstanding balance of more than $1,000, the loan must be manually underwritten, which means the loan officer has to review the loan application and supporting documents outside of the automated system.

The loan officer goes over the paperwork included in the borrower’s file very closely to determine their risk of mortgage default and whether they qualify for the loan program that they’re applying.

Disputed medical accounts are excluded from consideration, but disputed accounts that are paid on time must be factored into the borrower’s debt-to-income ratio.

How to remove a lingering credit report dispute

Gaining access to a new credit report with updated information is not an option for the borrower if the creditor won’t correct the information. And when a consumer files a complaint with the credit reporting agencies, the agencies will often defer to the creditor.

Just as you’ve reached out to your creditor and the credit reporting bureaus to file your dispute, you’ll want to take the same action to remove it. Contact the creditor directly and request that they update the account information to show that it’s no longer being disputed.

You may also want to reach out to Equifax, Experian and TransUnion to request dispute removal, but keep in mind they may also reach out to the creditor who is reporting the disputed account. See the FICO website for more information about contacting each bureau’s dispute department.

The bottom line

Dealing with an unresolved credit report dispute can turn into a consumer nightmare. Even if you’ve followed best practices, you may still be unhappy with the results.

Fortunately, you can still submit a complaint to the Consumer Financial Protection Bureau. They will forward your complaint directly to the company in dispute and work to get a response from them. Another option is to seek guidance from a consumer advocate or an attorney. The National Foundation for Credit Counseling may be a helpful place to start.

Credit reports and scores have such a strong influence on lifelong financial health, so the most effective defense is to be proactive about making sure yours are in the best shape possible. Regularly monitoring your credit profile and working to fix inaccuracies before applying for a mortgage is a good game plan to prevent major problems as you embark on the homebuying process.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Crissinda Ponder
Crissinda Ponder |

Crissinda Ponder is a writer at MagnifyMoney. You can email Crissinda here

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