If you’re thinking of purchasing a house in Texas, congratulations! You’re among 29 million others who are proud to call the Lone Star state home. Living here comes with its perks— vast and varied landscapes, a reasonable cost of living, friendly neighbors that you can call friends, and more.
Whether you’re moving here from out of state, a life-long resident and first-time homebuyer, or purchasing your fifth home, there are a few things you should know about Texas mortgage lending.
Home Buying Programs in Texas
Texas has unique opportunities for homebuyers.”
You might be familiar with some of the home buying programs available on the federal level, like FHA Loans and VA Loans. But did you know that Texas has several unique opportunities for homebuyers purchasing within the state?
Texas Department of Housing and Community Affairs (TDHCA)
The TDHCA offers three mortgage programs:
- My First Texas Home: This program is available to first-time homebuyers (or those who haven’t owned a home in the past 3 years) and veterans in Texas. This low-interest, fixed-rate mortgage with down payment assistance is available state-wide and is open to individuals who have a minimum 620 credit score, meet income limits, and are approved through a Texas Homebuyer Program lender.
- My Choice Texas Home: Even if you’re a repeat homebuyer, you can still take advantage of some of the same benefits that first-timers get with the My First Texas Home. Like that program, those participating in the My Choice Texas Home must have a minimum credit score of 620, meet income limits, and be approved through a program-approved lender.
- Texas Mortgage Credit Certificate Program: The Texas MCC Program is available to first-time homebuyers and veterans. This program doesn’t involve financing but instead entitles you to a dollar-for-dollar reduction on your federal tax liability.
The TDHCA also offers other programs like the Texas Homebuyer U and the Texas Statewide Homebuyer Education Program, both of which are designed to give homebuyers the resources and knowledge they need to successfully purchase a home in the state.
Veterans Land Board
Texas veterans and military members can take advantage of the special loan offerings through the Veterans Land Board.
- VLB Veterans Housing Assistance Program: Texas veterans may qualify for mortgages with competitive loan interest rates and little to no money required for a down payment. Veterans with a VA service-connected disability rating of 30% or more can qualify for an even greater discount rate.
- VLB Veterans Land Loan Program: Similarly, the Land Loan Program allows Texas veterans and military members to borrow money to purchase land. Some benefits of the program include good interest rates and a low minimum down payment of only 5%.
The Land Board also has additional programs like home improvement loans and Servicemembers Civil Relief Assistance. You can visit their website for more information.
Other Texas Programs
Be sure to look up other opportunities in the area that you want to purchase a house. Sometimes cities or counties offer their own area-specific programs or advantages for first-time buyers, veterans, and more.
Texas Mortgage Laws
Texas homebuyers get some special perks if the house you’re purchasing is set to be your primary residence. A primary residence is simply where you live most of the time. This is considered to be your principal dwelling location.
Thanks to the homestead act in Texas, you’ll pay lower property taxes on your primary residence. The homestead exemption will lower your home’s value in the eyes of the tax assessor, reducing your overall tax burden. Owner-occupied homes can also benefit from better home loan interest rates.
If you’re buying a primary residence, you have to move into the home within 60 days in most cases. This is because of an occupancy clause in your mortgage agreement. Failure to do so can result in you committing something known as occupancy fraud, which can come with legal and financial consequences.
Along those same lines, you can only have one primary residence at a time. After all, you can’t be two places at once! If you are a current homeowner purchasing a new house, you’ll need to make sure you don’t try and claim both houses.
Using Your Home Equity in Texas
One of the advantages of buying a home is being able to use your home’s equity down the line. It might even be one of your main motivations for purchasing a home. However, Texas has some strict laws regarding home equity loans and cash-out refinances that you should keep in mind.
Texas a(6) Laws
The piece of legislation that defines the rules for home equity loans is outlined in the Texas Constitution, Section 50a(6). For this reason, they are commonly just referred to as Texas a(6) laws. Here are just a few of those regulations to keep in mind:
- The maximum loan-to-value (LTV) you can get out of your primary residence’s equity is 80%. In other words, you can't borrow more than 80% of the equity you have built in your home.
- You can only have one equity loan on your home at a time. For example, if you took out a home equity loan five years ago and are still paying it off, you can’t take out another one, even though more than a year has gone by.
- You can only take out one home equity loan per year on your primary residence— even after you’ve paid off the first one.
- You can’t do a cash-out refinance within 12 months of purchasing the primary residence.
Remember that this is not an exhaustive list of all the 50a(6) rules. To learn more about all of the provisions in this section and how they apply to you, speak to a knowledgeable mortgage lender in Texas. Amplify Credit Union has served central Texas for over fifty years, and we’re here to give you all the information you need to make a strong financial decision.
Make Your Texas House a Home
Every state has different mortgage laws. It’s always important to take time and explore all of the home buying programs that may be available to you, as well as any rules that may apply in your unique situation. Contact our experienced real estate team today, and learn more about these Texas mortgage lending opportunities!