Austin is one of the most expensive housing markets in Texas — but that doesn’t mean first-time buyers are locked out. Several loan programs exist specifically for buyers who haven’t owned a home in the past three years, offering low down payments, flexible credit requirements, and terms that make homeownership genuinely achievable even at Austin prices.
The challenge isn’t that the programs don’t exist. It’s knowing which one fits your situation — and making sure you’re working with a lender who has access to all of them. Here’s a clear breakdown of the main first-time homebuyer loan programs available in Texas and what you need to qualify for each.
Who Counts as a First-Time Homebuyer in Texas?
For most federal loan programs, a “first-time homebuyer” is anyone who has not owned a primary residence in the past three years. This means:
- You could have owned a home 10 years ago and still qualify as a first-time buyer today
- Divorced individuals who lost ownership rights in a settlement often qualify
- If you owned a home but your spouse did not, they may qualify even if you don’t
It’s worth checking your status carefully — many buyers assume they don’t qualify when they actually do.
FHA Loans — The Most Popular First-Time Buyer Option
FHA loans are the most widely used loan program for first-time buyers in Texas, and for good reason. The Federal Housing Administration insures the loan, which allows lenders to offer more flexible terms than a conventional mortgage.
Key features:
- 3.5% minimum down payment with a 580+ credit score
- 10% down if your credit score is between 500–579
- Debt-to-income ratios up to 57% — more lenient than conventional
- Down payment can be a gift from family or employer
- Seller can pay up to 6% of closing costs
Travis County FHA loan limit (2026): $571,550 for a single-family home. This covers the majority of Austin’s entry-level and mid-range inventory.
The catch: FHA loans require mortgage insurance for the life of the loan if you put less than 10% down. That’s an upfront MIP (1.75% of the loan amount, usually rolled in) plus an annual MIP of about 0.55% per year. On a $400,000 loan, that’s roughly $183/month in mortgage insurance that doesn’t go away unless you refinance into a conventional loan later.
For buyers with credit scores below 620, FHA is almost always the right call. For buyers with 620+ scores, it’s worth comparing FHA to conventional — which brings us to the next option.
Conventional Loans — HomeReady and Home Possible
Two conventional programs specifically target first-time and lower-income buyers with down payments as low as 3%:
- Fannie Mae HomeReady — 3% down, reduced PMI rates, allows non-borrower household income to qualify
- Freddie Mac Home Possible — 3% down, similar structure, flexible income sources
Both programs are available to buyers whose income is at or below 80% of the area median income (AMI) for their county. In the Austin metro, that threshold is roughly $80,000–$85,000 for a single borrower in 2026.
Why conventional can beat FHA for 620+ buyers:
With conventional PMI, mortgage insurance can be removed once you reach 20% equity — either by paying down the loan or through home appreciation. FHA mortgage insurance stays for the life of the loan (with less than 10% down). Over 5–7 years, the difference in total mortgage insurance paid can be $10,000–$20,000+.
The conventional conforming limit in Texas is $832,750 — significantly higher than the FHA limit — giving conventional buyers access to a broader range of homes.
USDA Loans — $0 Down for Suburban and Rural Texas
USDA loans are the least-known $0 down option, and in the Austin area, more buyers qualify than you’d expect. The U.S. Department of Agriculture guarantees these loans for homes in eligible suburban and rural areas — and the definition of “eligible” is broader than most people assume.
Key features:
- $0 down payment — 100% financing
- Income limits apply — household income generally must be at or below 115% of the area median
- Property must be in an eligible area — not downtown Austin, but many suburbs qualify
- Lower mortgage insurance than FHA
Austin-area addresses that may be USDA-eligible: Parts of Kyle, Buda, Wimberley, Lockhart, Dripping Springs, parts of Georgetown, Manor, and Elgin. Eligibility is address-specific — I can check any property against the USDA eligibility map instantly.
For buyers who qualify, USDA is one of the best deals in mortgage financing. $0 down, lower monthly mortgage insurance than FHA, and competitive rates. The tradeoff is the property and income restrictions.
VA Loans — $0 Down for Veterans and Military
If you’re a veteran, active-duty service member, or surviving spouse, the VA loan is the single most powerful home loan available. $0 down payment, no private mortgage insurance, and rates that typically match or beat conventional loans.
Central Texas has one of the largest veteran populations in the country, with Fort Cavazos (formerly Fort Hood) just 60 miles north of Austin. Thousands of veterans and service members make Austin their home each year.
Contact me directly to discuss VA loan eligibility and current availability.
How to Choose the Right Program
The right loan depends on three things: your credit score, your income, and where you’re buying. Here’s a simple way to think about it:
- Credit score below 580: FHA with 10% down is likely your best option
- Credit score 580–619: FHA with 3.5% down
- Credit score 620+ and income below area median: Compare FHA vs. HomeReady/Home Possible — conventional often wins on total cost
- Credit score 620+ buying in an eligible suburban area: Check USDA first — $0 down with good terms is hard to beat
- Veteran or active military: VA loan is almost always the right call
In practice, the comparison isn’t always obvious — loan amounts, property types, and rate differences all affect the final math. I run these scenarios side by side for every first-time buyer I work with before making a recommendation.
What About Down Payment Amounts in Austin?
With Austin’s median home price around $573,000, a 3.5% FHA down payment on a $400,000 home is $14,000 — achievable for many buyers, especially when family gift funds are allowed. New construction communities in Pflugerville, Kyle, Buda, and Leander offer entry-level homes in the $280,000–$380,000 range, where a 3.5% down payment runs $9,800–$13,300.
Closing costs are a separate line item — typically $4,000–$8,000 — but there are ways to reduce those too. Sellers can contribute up to 3–6% of the purchase price toward your closing costs depending on loan type, and working with a broker who charges $0 in lender fees removes $2,000–$5,000 from the equation immediately.
The First Step: Pre-Approval
Before you start house hunting, get pre-approved. A pre-approval tells you exactly which programs you qualify for, how much you can borrow, and what your monthly payment would look like — before you’re under the pressure of a live offer.
As an independent mortgage broker, I shop your scenario across 40+ wholesale lenders to find the best rate and program for your situation — not just whatever one bank offers. And I charge $0 in lender fees, which means more of your money goes toward your home, not toward closing costs.
Pre-approval takes about 20 minutes and I can usually have a letter ready within 24–48 hours.
Call or text: 512-423-4663
Email: rstout@texasmortgageconsultants.com
Or start your pre-approval online →
Russell Stout is an independent mortgage broker at Texas Mortgage Consultants in Austin, TX. NMLS# 220896 | Company NMLS# 1843758 | Licensed by the Texas Department of Savings and Mortgage Lending. All loans subject to credit approval.
Frequently Asked Questions
What credit score do I need to buy a home in Texas for the first time?
The minimum credit score depends on your loan type. FHA loans accept scores as low as 580 (3.5% down) or 500 (10% down). Conventional loans typically require 620+. USDA loans generally require 640+. VA loans have no official minimum but most lenders want 580–620.
How much do I need to save before buying my first home in Austin?
With an FHA loan, the minimum down payment is 3.5% of the purchase price. On a $350,000 home, that’s $12,250. You’ll also need funds for closing costs — typically $4,000–$8,000 — though sellers can contribute and working with a $0 lender fee broker significantly reduces this. Budget for 5–7% of the purchase price total if you want a comfortable cushion.
Can I get a mortgage with no down payment in Texas?
Yes — two programs offer $0 down: USDA loans (for homes in eligible suburban/rural areas) and VA loans (for veterans and active-duty military). Both have income or eligibility requirements. USDA eligibility is address-specific; Russell can check any property instantly.
Is FHA or conventional better for a first-time buyer in Texas?
It depends on your credit score and income. Buyers with scores below 620 usually benefit most from FHA. Buyers with 620+ scores should compare both — conventional often wins on total cost because PMI can be removed at 20% equity, while FHA mortgage insurance typically stays for the life of the loan.
How long does it take to get pre-approved for a first-time buyer loan in Texas?
With Texas Mortgage Consultants, pre-approval typically takes 24–48 hours from the time you submit your application and income documents. The application itself takes about 20 minutes.
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