Texas Down Payment Assistance: The Complete 2026 Guide

What is Texas down payment assistance?

Texas down payment assistance (DPA) is help — usually a grant, forgivable second loan, or low-interest deferred second lien — that covers some or all of the down payment and closing costs on a Texas home purchase. Texas runs more DPA programs than most buyers realize: two state programs (TSAHC and TDHCA), a federal Mortgage Credit Certificate (MCC) tax credit, the Texas Veterans Land Board (VLB) for veterans, and 25+ city and county programs across the state.

Texas down payment assistance comes in three main structures, and the right one for you depends on your loan type, how long you plan to stay in the home, and which program you qualify for:

How Texas down payment assistance pairs with FHA, VA, USDA, and conventional loans

Texas DPA isn’t a loan by itself — it sits on top of a regular mortgage. The most common pairings:

TSAHC and TDHCA: Texas’s two state DPA agencies

Texas runs two parallel state down payment assistance programs through separate agencies. Both fund the same underlying mission — help Texas homebuyers cover the down payment — but they have different program structures, income limits, and pairing rules.

One MCC per loan. You can use a TSAHC MCC or a TDHCA MCC, never both. Compare the two side-by-side in our TSAHC vs TDHCA decision guide.

Texas Mortgage Credit Certificate (MCC): how the tax credit works

The Texas Mortgage Credit Certificate (MCC) is a federal tax credit issued at closing under IRC §25. It lets eligible Texas first-time buyers claim a percentage of their annual mortgage interest as a federal income tax credit — up to $2,000 per year, subject to the buyer’s federal tax liability.

The MCC is one of the most-used pairing tools in Texas DPA. It pairs cleanly with most TSAHC and TDHCA DPA structures (with one exception — TDHCA’s My Choice Texas Home does not allow MCC pairing).

Key MCC mechanics

• Issued at closing — you can’t add it later
• Available for the life of the loan (refinance reissuance possible)
• Credit equals a percentage of your annual mortgage interest (TSAHC and TDHCA both use 20%, with the $2,000/year cap from IRS rules)
• You still claim the standard mortgage interest deduction on the 80% remainder
• Your actual benefit depends on your federal tax liability that year — if you owe $1,200 in federal tax, your MCC benefit caps at $1,200, not $2,000

Important. The $2,000 figure is a federal IRS cap, not a guaranteed benefit. Your actual MCC value depends on your tax situation. A CPA or tax preparer can model the benefit for your specific income and deductions.

Texas VLB: down payment programs for Texas veterans

The Texas Veterans Land Board (VLB), administered by the Texas General Land Office, runs three veteran-only programs that pair with VA loans and Texas DPA:

• VHAP (Veterans Housing Assistance Program) — below-market-rate second lien on a primary residence (up to the VA loan limit). Pairs with VA in a “two-note” structure.
• VLB Land Loan — up to $200,000 for a single veteran ($275,000 for dual-spouse veterans) on Texas land purchases
• VLB Home Improvement Loan — up to $50,000 with a 20-year term

Veterans rated 30% or more service-connected disabled get a 0.5% rate discount on the VLB second lien. The VA funding fee is waived for 10%+ disabled veterans.

See all Texas DPA programs →

Texas DPA income limits (Area Median Income)

Every Texas down payment assistance program ties eligibility to Area Median Income (AMI) — the median household income for your county, published annually by the U.S. Department of Housing and Urban Development. Income limits are not a single dollar figure; they vary by county, by household size, and by program.

Texas DPA income limit ranges as of 2026:

• TSAHC Home Sweet Texas Home Loan: typically up to 80% AMI for the county
• TSAHC Homes for Texas Heroes: up to 115% AMI in many counties (higher than the standard program)
• TDHCA My First Texas Home: 80% AMI in most counties (HUD-targeted areas higher)
• City DPA programs: typically 80–120% AMI, varies by city

For context: in many Texas metros, 80% AMI for a family of four lands in the $70,000–$95,000 range. Heroes-program 115% AMI can comfortably cross six figures. The exact ceiling for your specific county and household size is published in the official HUD AMI tables.

Texas DPA credit score requirements

The credit score floor for Texas down payment assistance is set by two layers: the program minimum (set by TSAHC, TDHCA, or the city agency) and the lender overlay (the additional underwriting standard your loan officer’s lender requires).

• TSAHC programs: 620 FICO minimum on most loan types (some flexibility on manual underwriting)
• TDHCA programs: 620 FICO minimum, some loan types accept lower
• City programs: typically 620–640 minimum, varies by city
• Lender overlays: many lenders apply 640 or 660 minimums above the program floor

For context: the U.S. average FICO score is 715, so a 620 minimum is well below the national average. If you’re on the borderline, ShopDPA can match you to a Texas LO whose lender works with manual underwriting and lower-FICO scenarios.

HUD homebuyer education: required for Texas DPA

Most Texas down payment assistance programs require completion of an approved homebuyer education course before closing. Courses run 6–8 hours and cover budgeting, mortgage basics, the Texas closing process, post-purchase home maintenance, and how to avoid foreclosure.

Two main paths:

• Online courses — Framework Homeownership and eHome America are the most common ($75–$99). Self-paced, typically completable in one sitting.
• HUD-approved counseling agencies — in-person classes, often free. Find a list at HUD’s Find a Counselor tool.

Save the certificate — your loan officer needs it before clear-to-close.

Texas DPA recapture tax (IRS §143)

The federal recapture tax under IRC §143 is the most-misunderstood part of Texas DPA. Here is the accurate version: a recapture tax can apply only when three conditions all happen:

1. You sell the home within 9 years of the original purchase
2. Your household income at the time of sale exceeds the program’s adjusted qualifying income limit for your county and family size
3. You realize a capital gain on the sale

If any one of those three conditions doesn’t happen, no recapture is owed. Most Texas DPA borrowers never trigger all three.

Even when recapture does apply, both TSAHC and TDHCA run reimbursement programs — eligible borrowers who get hit with recapture tax can be reimbursed for the federal tax owed. Save your closing documents and contact the issuing agency before filing the year you sell.

This is general information, not tax advice. Talk to a CPA before you sell if you think recapture might apply.

Texas DPA required documents checklist

Bring these documents to your first appointment with the loan officer to move from intake to pre-qualification quickly:

• Photo ID — driver’s license or state ID
• Income — last 2 pay stubs, last 2 W-2s, last 2 years of federal tax returns (1040 + all schedules)
• Self-employment (if applicable) — last 2 years business tax returns + YTD profit & loss statement
• Assets — last 2 months of bank statements (all accounts), most-recent 401(k) / IRA / brokerage statements
• Large deposits — letter of explanation + paper trail for any deposit over ~$500 not from payroll
• VA buyers — DD-214 (or current Statement of Service for active duty), Certificate of Eligibility (your LO can pull)
• Heroes program — current employer verification letter on letterhead
• Homebuyer counseling certificate — from your HUD-approved course
• Purchase contract (once selected) — fully executed sales contract from your real estate agent