TDHCA vs. TSAHC: Which Texas Down Payment Assistance Program Is Right for You?

For most first-time buyers in Texas who qualify for both programs, TSAHC's non-repayable grant is the better choice if you plan to refinance within three years, and TDHCA's My First Texas Home paired with a Mortgage Credit Certificate (MCC) is the better choice if you need the DTI boost to qualify for a larger purchase price and plan to stay in the home long-term. The key difference is not just the dollar amount of assistance — it is the repayment structure, the MCC compatibility, and the credit score and income thresholds that determine which program your profile actually fits.

Texas runs two separate state agencies that fund down payment assistance, and most buyers — and many agents — treat them as interchangeable. They are not.

The Two Agencies at a Glance

Texas Department of Housing and Community Affairs (TDHCA) is a state agency offering programs specifically targeting first-time buyers and repeat buyers who meet income thresholds. Its flagship programs are My First Texas Home (MFTH) and My Choice Texas Home (MCTH).

Texas State Affordable Housing Corporation (TSAHC) is a state-chartered non-profit offering Homes for Texas Heroes (targeted at teachers, police, firefighters, EMS, and veterans) and Home Sweet Texas (open to all income-qualifying buyers). TSAHC is structurally distinct from TDHCA and serves a higher proportion of moderate-income and single-person households.

Full Program Comparison

What Each Assistance Structure Actually Means

30-year deferred repayable second lien (TDHCA): You receive the assistance now but must repay it in full when you sell, refinance, or pay off the first mortgage. The lien carries a 0% interest rate and requires no monthly payments, but the principal comes due at the exit event. If home values rise substantially, the lien is a fixed dollar amount — you are not repaying a percentage of future equity. But if you plan to refinance within a few years, this creates a cash obligation at refinance.

3-year deferred forgivable second lien (TDHCA and TSAHC): The lien is forgiven entirely after 36 months of on-time payments, provided you remain in the home as your primary residence and do not refinance or sell before the forgiveness period ends. If you refinance or sell before 36 months, the full balance is due. For buyers who are confident they will stay in the home at least three years without refinancing, this is effectively free money.

Non-repayable grant (TSAHC): The assistance requires no repayment under any circumstances. You can sell, refinance, or pay off the mortgage on any timeline. The tradeoff is that the first-mortgage interest rate on a TSAHC grant program is slightly higher than the standard program rate — the cost is baked into the rate rather than deferred to a repayment event. For buyers who plan to refinance within one to two years (for example, after building equity or when rates drop), the grant often wins on total cost.

The Mortgage Credit Certificate: The Factor Most Buyers Miss

The MCC is a federal tax credit — not a deduction — equal to 15% of the annual mortgage interest paid on a qualifying first mortgage. The remaining 85% of mortgage interest can still be claimed as a standard itemized deduction.

The MCC's most important function is that it reduces a buyer's effective debt-to-income ratio in underwriting. Lenders can add the monthly MCC benefit back as additional qualifying income, allowing buyers to qualify for a purchase price they otherwise could not reach under strict DTI limits.

The critical rule: The standalone MCC program is discontinued. The MCC must be paired with a TDHCA or TSAHC first mortgage with down payment assistance. And the TDHCA My Choice Texas Home program — despite being otherwise robust — cannot be combined with an MCC. My First Texas Home and TSAHC programs can.

For a buyer purchasing a $400,000 home with a 30-year mortgage at a 6.5% rate, the annual mortgage interest in Year 1 is approximately $25,200. A 15% MCC generates a $3,780 annual federal tax credit — effectively reducing the monthly cost of homeownership by $315. Over a 5-year horizon with no refinancing, that is $18,900 in cumulative federal tax savings that a buyer who chooses My Choice Texas Home (incompatible with MCC) would forfeit.

Who This Is For

TDHCA My First Texas Home + MCC is the right choice if:

• You are a true first-time buyer (no primary home ownership in the past 3 years) or a qualifying veteran
• Your credit score is at least 620 (640 for conventional HFA)
• You need the DTI reduction from the MCC to qualify for your target purchase price
• You plan to stay in the home for 3+ years without refinancing if taking the forgivable second lien, or longer if taking the repayable lien
• Your household income falls within the county-specific MFTH income limits

TDHCA My Choice Texas Home is the right choice if:

• You are a repeat buyer who has owned a home within the past 3 years
• Your income exceeds MFTH limits but falls within MCTH's higher caps
• You do not need the MCC and can qualify on your DTI alone

TSAHC Home Sweet Texas or Homes for Texas Heroes is the right choice if:

• You qualify as a public service professional (teachers, police, firefighters, EMS, veterans, military, corrections officers, nursing faculty) and want the grant without the repayment obligation
• You plan to refinance within one to three years and cannot risk a forgivable lien's repayment trigger
• You want a non-repayable grant and are comfortable with the marginally higher first-mortgage rate it implies
• Your income is at or below 115% of AMFI for your county

Who This Is NOT For

TDHCA programs are not right if:

• You are a repeat buyer choosing My Choice and also want MCC savings — that combination is prohibited
• Your household income exceeds the MFTH county limits — you will need MCTH or TSAHC instead
• You are purchasing above the HUD-specified purchase price limit in your county (applies to MFTH in non-targeted areas)

TSAHC programs are not right if:

• Your income exceeds 115% of AMFI — TSAHC income limits are firm
• You want zero impact on your first-mortgage interest rate — the grant option carries a slightly elevated rate

Stacking Local Municipal Programs on Top

State DPA programs can be stacked with local municipal programs, subject to lender approval and program guidelines:

• Dallas Homebuyer Assistance Program (DHAP): Up to $50,000 (or $60,000 in High Opportunity Areas) for households at or below 80% AMI (or 120% AMI for targeted occupations). Property value limit: $342,000. Administered by BCL of Texas as of May 2026.
• City of Houston Homebuyer Assistance Program: Up to $50,000 based on financial need, for households at or below 80% AMI. Liquid asset limit: $30,000. Five-year compliance and forgiveness period.
• Austin Down Payment Assistance Program: Up to $40,000, for households at or below 80% AMI, forgivable over 5 years (under $14,900) or 10 years (above $14,900).
• San Antonio Homeownership Incentive Program (HIP): Suspended for FY 2026; proposed resumption October 1, 2026. Up to $30,000 (HIP 80) for households at 80% AMI.

A buyer purchasing a $350,000 home in Dallas with FHA financing could combine TSAHC's 5% grant ($16,625 based on loan amount), the DHAP grant ($50,000), and a seller concession of 3% ($10,500) to cover the FHA 3.5% down payment and most closing costs with minimal out-of-pocket exposure. Work with a TDHCA- or TSAHC-approved participating lender to structure these combinations — not all lenders are authorized for state programs.

Tradeoffs Summary

FAQ

Can I use both TDHCA and TSAHC programs at the same time? No. These are competing program structures. You apply to one state agency's program and pair it with the corresponding mortgage product. You can stack either state program with qualifying local municipal programs (Dallas, Houston, Austin), but not with each other simultaneously.

What credit score do I need to qualify for Texas DPA programs? Both TDHCA and TSAHC require a minimum of 620 for government-backed loans (FHA, VA, USDA). For conventional HFA loans, the minimum rises to 640. TSAHC allows manual underwriting for scores between 620 and 639, subject to a maximum 43% DTI and a 0.25% loan-level price adjustment.

Is the TDHCA forgivable second lien truly free if I stay 3 years? Yes — if you remain in the home as your primary residence, make on-time payments, and do not refinance or sell before the 36-month forgiveness window closes. The lien is forgiven in full and the mortgage recorded against your property is released. However, if you refinance at month 30 because rates dropped, the full second lien balance is due at that refinancing — so model both scenarios before selecting a forgivable lien over a non-repayable grant.

Does the MCC affect my federal taxes every year? Yes. The MCC generates a federal tax credit equal to 15% of the annual mortgage interest you pay, every year the first mortgage is active and the MCC is in force. The credit reduces your federal tax liability dollar-for-dollar — it is not a deduction. The remaining 85% of your mortgage interest can still be deducted if you itemize. You must file IRS Form 8396 annually to claim it.

If I choose TSAHC's grant, how much higher is my first-mortgage interest rate? TSAHC does not publish a fixed rate premium for the grant option — the rate difference reflects market conditions and individual lender pricing at the time of origination. Historically, grant program rates have run 0.25% to 0.50% higher than equivalent forgivable lien programs. Compare the total interest cost over your expected holding period against the repayment risk of the forgivable lien to determine which is cheaper on a net basis.

Where do I find TDHCA- and TSAHC-approved lenders? Both agencies maintain current participating lender lists on their websites. Not all mortgage brokers or national banks are authorized to originate state-backed housing programs. The Texas First-Time Home Buyer Guide includes the DPA decision framework and lender coordination steps as part of its comprehensive coverage of the Texas buying process.

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