First-Time Home Buyer Guide: Texas 2026
Table of Contents
- Overview for First-Time Buyers in Texas
- Down Payment Options: FHA, Conventional, and VA
- Texas First-Time Buyer Programs
- Step-by-Step Home Buying Process
- Understanding Closing Costs in Texas
- Common Mistakes First-Time Buyers Make
- Getting Pre-Approved: Tips and Timeline
- Resources for Texas First-Time Buyers
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Overview for First-Time Buyers in Texas
Buying your first home is one of the most significant financial decisions you will ever make, and Texas is one of the best states to do it. With no state income tax, relatively affordable housing compared to coastal markets, and robust job growth, the Lone Star State attracts thousands of first-time buyers every year. In 2026, conditions are particularly favorable thanks to moderating interest rates and a growing inventory of starter homes.
First-time buyers in Texas face unique considerations, from navigating the state's higher-than-average property taxes to understanding disclosure requirements and the option period. The Texas Real Estate Commission (TREC) uses standardized contract forms that differ from those in other states, so working with an experienced Texas agent is essential even if you have purchased homes elsewhere.
This guide covers everything you need to know, from down payment options and state assistance programs to the step-by-step purchase process and the most common mistakes that delay or derail first-time buyers. Whether you are looking in Austin, Dallas, Houston, or San Antonio, the fundamentals apply statewide.
Down Payment Options: FHA, Conventional, and VA
Key Insight: First-time homebuyers in Texas benefit from numerous programs including down payment assistance, FHA loans with 3.5% down, and Texas-specific programs like TSAHC. Understanding your budget, getting pre-approved, and working with an experienced agent are essential first steps to homeownership.
The most common myth among first-time buyers is that you need 20% down. In reality, most first-time buyers in Texas put down far less. FHA loans require just 3.5% down with a credit score of 580 or higher. For a $350,000 home, that is $12,250 instead of $70,000. FHA loans are backed by the Federal Housing Administration and are available through most major lenders. They do require mortgage insurance (MIP), which adds to your monthly payment, but the low barrier to entry makes homeownership accessible much sooner.
Conventional loans through Fannie Mae and Freddie Mac now offer programs with as little as 3-5% down for first-time buyers. The HomeReady and Home Possible programs are specifically designed for moderate-income borrowers and allow gift funds for the down payment. Private mortgage insurance (PMI) is required on conventional loans with less than 20% down, but unlike FHA MIP, PMI can be removed once you reach 20% equity.
Veterans and active-duty military have access to VA loans, which require zero down payment and no mortgage insurance. Texas has one of the largest veteran populations in the country, and the Texas Veterans Land Board offers additional benefits including the VLB Veterans Housing Assistance Program. If you qualify for VA financing, it is almost always the best option available. Eligible surviving spouses may also use VA loan benefits.
Texas First-Time Buyer Programs
The Texas Department of Housing and Community Affairs (TDHCA) offers two flagship programs for first-time buyers. The My First Texas Home program provides below-market interest rates and up to 5% in down payment and closing cost assistance in the form of a deferred, forgivable second lien. To qualify, you must meet income limits (which vary by county and household size), have a credit score of at least 620, and complete a homebuyer education course.
The My Choice Texas Home program is similar but available to repeat buyers as well. It offers a 30-year fixed-rate mortgage with down payment assistance up to 5% of the loan amount. Both programs can be combined with FHA, VA, or conventional financing. Income limits for 2026 range from approximately $100,000-$130,000 depending on your county and family size, making them accessible to a wide range of middle-income buyers.
In addition to state programs, many Texas cities and counties offer their own down payment assistance. Austin's DPA program provides up to $40,000 for eligible buyers within the city limits. Houston's HOPE program and San Antonio's homebuyer incentive programs offer similar benefits. Your lender and real estate agent should be familiar with the programs available in your target area, as these can be combined to significantly reduce your out-of-pocket costs at closing.
Step-by-Step Home Buying Process
Step 1: Check your credit and finances. Pull your credit reports from all three bureaus and address any errors or delinquencies. Aim for a credit score of 620 or higher for conventional and TDHCA programs, or 580 for FHA. Calculate your total monthly debts and ensure your debt-to-income ratio is below 43% (or 50% for some FHA scenarios). Start saving for your down payment and closing costs, which together typically range from 5-8% of the purchase price.
Step 2: Get pre-approved. A pre-approval letter from a lender tells you exactly how much you can borrow and shows sellers you are a serious buyer. The pre-approval process involves a credit check, income verification, and documentation of your assets. Shop at least three lenders to compare rates and fees. Your pre-approval is typically valid for 60-90 days. Step 3: Find a buyer's agent. In Texas, buyer representation is free to the buyer in most transactions, as the seller pays agent commissions. Choose an agent who specializes in your target area and price range.
Steps 4-7: Search for homes, make an offer using the TREC contract, negotiate terms, and enter the option period (typically 7-10 days and $200-$500 in Texas). During the option period, complete your home inspection, get repair estimates, and negotiate any credits. Steps 8-10: Complete your appraisal, finalize mortgage underwriting, do a final walkthrough, and close at the title company. The entire process from pre-approval to closing typically takes 30-45 days once you find the right home.
Understanding Closing Costs in Texas
Closing costs in Texas typically range from 2-4% of the purchase price for buyers. On a $350,000 home, expect to pay $7,000-$14,000 in closing costs on top of your down payment. The largest component is usually the lender origination fee and discount points, which together can run 0.5-1.5% of the loan amount. Title insurance is another significant expense and is unique in Texas because the state regulates title insurance rates, so prices are the same regardless of which title company you choose.
Other closing costs include the appraisal fee ($400-$600), home inspection ($350-$500), survey ($400-$600 if not provided by seller), recording fees, prepaid property taxes, prepaid homeowner's insurance, and escrow account funding. Texas does not have a transfer tax, which saves buyers compared to many other states. Your lender is required to provide a Loan Estimate within three business days of your application, detailing all expected closing costs.
Several strategies can reduce your closing costs. You can ask the seller to contribute up to 3-6% of the purchase price toward your closing costs (depending on loan type). TDHCA programs include closing cost assistance. Some lenders offer lender credits in exchange for a slightly higher interest rate. And shopping around for homeowner's insurance, which is required and often expensive in Texas due to storm risk, can save hundreds annually.
Common Mistakes First-Time Buyers Make
The number one mistake is shopping for homes before getting pre-approved. Without pre-approval, you do not know your true budget, and sellers will not take your offer seriously. The second most common error is draining your savings for the down payment and having nothing left for emergencies. Financial advisors recommend keeping at least three months of housing payments in reserve after closing. Unexpected repairs, appliance replacements, and maintenance costs can surprise new homeowners.
Many first-time buyers also underestimate the impact of Texas property taxes. Because Texas has no state income tax, property tax rates are among the highest in the nation, averaging 1.6-2.2% of assessed value depending on the county. On a $350,000 home, that is $5,600-$7,700 per year, or $467-$642 per month added to your housing payment. Always factor property taxes into your monthly budget calculation, and ask your agent about the homestead exemption, which can reduce your taxable value by $100,000.
Other mistakes include waiving inspections to win a bidding war (never do this on your first home), choosing a home solely based on monthly payment without considering total cost of ownership, ignoring the neighborhood and commute in favor of the house itself, and making large purchases on credit (new car, furniture) between pre-approval and closing, which can disqualify your mortgage. Patience and discipline are your greatest allies.
Getting Pre-Approved: Tips and Timeline
Start the pre-approval process at least 60 days before you plan to begin your home search. Gather your documentation in advance: two years of tax returns, two months of bank statements, 30 days of pay stubs, W-2s or 1099s, and identification. Self-employed buyers need additional documentation including profit-and-loss statements and potentially business tax returns. Having everything organized speeds up the process from weeks to days.
Apply with at least three lenders to compare rates, fees, and loan programs. Each lender will pull your credit, but multiple mortgage inquiries within a 14-45 day window count as a single inquiry for scoring purposes. Pay attention to the Annual Percentage Rate (APR), which includes the interest rate plus fees, for the most accurate cost comparison. Do not be swayed by the lowest rate alone if it comes with high origination fees.
Once pre-approved, maintain your financial profile. Do not open new credit accounts, make large purchases, change jobs, or move large sums of money between accounts without consulting your lender. Any of these actions can trigger a new underwriting review and potentially delay or jeopardize your loan. Your lender will re-verify your credit and employment shortly before closing, so consistency is key throughout the process.
Resources for Texas First-Time Buyers
The TDHCA website (tdhca.state.tx.us) is the definitive source for state-level assistance programs, income limits, and participating lender lists. The agency also maintains a network of HUD-approved housing counselors who provide free one-on-one guidance. Completing a TDHCA-approved homebuyer education course is required for some programs and recommended for all first-time buyers.
For market-specific information, review our city guides for Austin, Dallas, Houston, and San Antonio. Each guide includes neighborhood overviews, school district information, and current market statistics. Our Real Estate Glossary demystifies the terminology you will encounter throughout the buying process, from "earnest money" to "escrow" to "option period."
Finally, the Dwellverse Home Buying Guide 2026 provides a comprehensive deep-dive into every aspect of the purchase process, including checklists, timelines, and cost calculators. When you are ready to take the first step, contact our team for a free buyer consultation. We specialize in helping first-time buyers navigate the Texas market with confidence.
Sheila Smith Oliver is the founder and principal broker of Dwellverse, with over two decades of experience in Texas residential real estate. She has personally facilitated 500+ successful transactions across Austin, Dallas, Houston, and San Antonio, totaling over $250 million in sales volume. Sheila specializes in luxury properties, relocation services, and investment strategy.
Frequently Asked Questions
Down payment requirements in Texas start at 0% for VA loans, 3.5% for FHA loans, and 3-5% for conventional loans. On a $350,000 home, that ranges from $0 to $17,500. Texas state programs through TDHCA can provide up to 5% in down payment assistance, potentially covering your entire down payment on an FHA loan.
The minimum credit score depends on your loan type. FHA loans require 580 for a 3.5% down payment (500-579 requires 10% down). Conventional loans typically require 620-640. VA loans have no official minimum but most lenders require 620. TDHCA programs require a minimum of 620. Higher scores qualify for better interest rates.
The option period is a negotiated timeframe, typically 7-10 days, during which the buyer can terminate the contract for any reason and receive a refund of their earnest money. The buyer pays a non-refundable option fee, usually $200-$500, for this right. It is the primary due diligence window for home inspections and is unique to Texas real estate contracts.
Yes, VA loans offer 0% down payment for eligible veterans and active-duty military. USDA loans offer 0% down for rural and some suburban areas. Additionally, combining TDHCA down payment assistance with FHA financing can result in minimal or no out-of-pocket down payment, though you will still need funds for the option fee and some closing costs.
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Last updated: 2026-01-27