This program was just released by the Texas Department of Housing & Community Affairs. Its budget of $500 million is available to low and middle income first time home buyers in Texas on a first-come, first-served basis. This means as applications are received, funds are set aside. It can be used with many loan programs, FHA, Conventional, USDA, and VA; and on residential single family homes or approved condos up to approximately $258,690 in cost for non-targeted areas. This is a great program for first time home buyers in Austin and the entire state of Texas.
There are 2 different programs here: Assisted and Unassisted.
- Assisted : a second, silent lien of 5% of the mortgage amount to help with down payment and closing costs. This second lien is interest-free, and will have to be paid back after the 30 year mortgage closes. Interest rates are a bit above market rates, or about 5.74% interest rate approximately.
- Unassisted: no second lien, but the interest rate will be a bit below market rates, or 4.99% approximately
Who can use the program?
- First time home buyer occupant, it does not matter who else is on the loan, as long as the occupant is a first time home buyer and is on the deed
- Current home owners who purchase in a "targeted" area (see below)
- Meets income requirements (see below)
- Completes a certified Home Buyer Education course prior to underwriting, costs is about $400-$500 and can be completed online
"Targeted" area = low income areas, Travis county only has a handful of these areas: Census tracts 000604, 000802, 000804, 001000, 002311, 002316, check the status of your area here
Most of Travis county is a non-targetted area, but I can help you determine if the property you are looking at meets the criteria.
- Sum of all persons' income (all sources) either living in the property or on the Deed
- Targeted area, 1-2 persons = $87,960 max
- Non-targeted areas, 1-2 persons = $73,300 max
Why use the program?
- I have a down payment, but I would like below market interest rates
- I need down payment or closing cost assistance
Restriction: Recapture tax!
If the property is sold within 9 years of the mortgage closing and they profit on the sale, the borrowers will have to pay the lesser of these two amounts:
- 50% of the net gain on the sale, OR
- 6.25% of the original mortgage amount
Example: If you purchase the property and close the mortgage for $130,000, and then sell the property 6 years later using a Realtor for $145,000 (considering 9% approximate fees for closing and commissions), you will net $1950 in profit. Your Recapture Tax would be $975. Disclaimer: this is only an example, and numbers would have to be confirmed by a lender.
Contact me if you would like more information (cell phone 512-789-2062), or are interested in taking advantage of this program!
My thanks go to John McClellan of Supreme Lending in Austin, TX who gave a great presentation on this program!