Texas DPA on FHA, VA, USDA, and Conventional Loans

Texas DPA on FHA, VA, USDA, and Conventional Loans

One of the most common questions we hear from Texas home buyers is: "Can I use down payment assistance with my loan?" The short answer is yes, but the details depend on which loan type you choose. Each mortgage program has its own down payment and closing cost requirements, and Texas DPA programs are designed to work alongside them.

In this guide, we break down exactly how down payment assistance pairs with FHA, VA, USDA, and conventional loans so you can find the combination that makes the most sense for your financial situation.

Understanding the Basics of DPA and Loan Pairing

Down payment assistance programs in Texas, such as those offered through the Texas State Affordable Housing Corporation (TSAHC) and the Texas Department of Housing and Community Affairs (TDHCA), provide grants or forgivable loans to help cover your upfront costs. These programs do not replace your mortgage. Instead, they layer on top of the primary loan you choose.

The key factors that change based on your loan type include:

• Minimum down payment required by the loan program
• Mortgage insurance requirements and costs
• Eligibility criteria such as military service or property location
• How much DPA you actually need to close

Let's walk through each loan type one by one.

FHA Loans + DPA: The Most Popular Combination

FHA loans are insured by the Federal Housing Administration and are the most common loan type paired with Texas DPA programs. Here is why this combo works so well:

How It Works

FHA loans require a minimum down payment of 3.5% of the purchase price. Most Texas DPA programs offer up to 5% in assistance, which means the DPA can cover your entire FHA down payment and still leave funds to help with closing costs.

For example, on a $275,000 home, the FHA down payment would be $9,625. A 5% DPA grant from TSAHC would provide $13,750, covering the down payment with over $4,000 left for closing costs.

Key Considerations

• Credit score: FHA loans typically require a 620 minimum credit score when paired with DPA programs (some programs may allow 640+)
• Mortgage insurance: FHA loans require both an upfront mortgage insurance premium (1.75% of the loan amount) and a monthly mortgage insurance premium for the life of the loan
• Loan limits: FHA loan limits vary by county in Texas, ranging from $524,225 in most areas to higher amounts in certain counties

FHA + DPA is often the best fit for first-time buyers with moderate credit scores and limited savings.

VA Loans + DPA: Maximizing Veteran Benefits

VA loans, backed by the Department of Veterans Affairs, already offer one of the best benefits in mortgage lending: no down payment required. So where does DPA come in?

How It Works

Even though VA loans do not require a down payment, buyers still face closing costs that can range from 2% to 5% of the purchase price. Texas DPA programs can cover these closing costs, allowing eligible veterans and active-duty service members to purchase a home with virtually no out-of-pocket expense.

Additionally, DPA funds can be used to cover the VA funding fee, which ranges from 1.25% to 3.3% depending on your service history and whether you have used a VA loan before.

Key Considerations

• Eligibility: You must have qualifying military service (active duty, veteran, National Guard, or surviving spouse)
• No mortgage insurance: VA loans do not require monthly mortgage insurance, which lowers your monthly payment
• Property requirements: The home must meet VA minimum property requirements
• TSAHC Homes for Texas Heroes: Veterans may also qualify for the Homes for Texas Heroes program, which offers enhanced DPA benefits

VA + DPA is the strongest combination for eligible military borrowers who want to minimize every dollar spent at closing.

USDA Loans + DPA: Rural and Suburban Homebuyers

USDA loans, guaranteed by the U.S. Department of Agriculture, are designed for buyers in eligible rural and suburban areas. Like VA loans, USDA loans require no down payment.

How It Works

Since USDA loans cover 100% of the purchase price, DPA funds are applied toward closing costs and the USDA guarantee fee (1% upfront and 0.35% annually). Many Texas communities outside of major metro centers qualify for USDA financing, making this an excellent option for buyers in smaller cities and towns.

Key Considerations

• Location restrictions: The property must be in a USDA-eligible area. Many suburbs of Houston, Dallas, San Antonio, and Austin qualify, but urban centers generally do not
• Income limits: USDA has its own household income limits, which are separate from DPA program limits. You must meet both
• Credit score: Most lenders require a minimum 640 credit score for USDA loans
• Lower monthly costs: The USDA annual guarantee fee of 0.35% is significantly lower than FHA mortgage insurance

USDA + DPA is ideal for buyers in eligible areas who want zero down payment and need help covering closing costs.

Conventional Loans + DPA: Flexible and Competitive

Conventional loans are not backed by a government agency and are the most widely available loan type. When paired with DPA, they offer some distinct advantages.

How It Works

Conventional loans typically require a minimum down payment of 3% to 5%. Texas DPA programs offering up to 5% can cover this requirement entirely. Some programs, like TDHCA's My First Texas Home, are specifically structured to work with conventional financing.

Key Considerations

• Credit score: Conventional loans generally require a 620 to 680+ credit score, depending on the lender and DPA program
• Private mortgage insurance (PMI): Required when you put down less than 20%, but PMI on conventional loans can be removed once you reach 20% equity, unlike FHA mortgage insurance
• Loan limits: Conventional conforming loan limits in Texas are $766,550 for 2025 in most counties
• No upfront mortgage insurance fee: Unlike FHA, there is no upfront mortgage insurance premium

Conventional + DPA is a strong choice for buyers with good credit who want the ability to drop mortgage insurance in the future.

Loan Type Comparison Table

Feature	FHA + DPA	VA + DPA	USDA + DPA	Conventional + DPA
Min. Down Payment	3.5%	0%	0%	3%-5%
DPA Covers	Down payment + partial closing costs	Closing costs + funding fee	Closing costs + guarantee fee	Down payment + partial closing costs
Mortgage Insurance	Upfront + monthly (life of loan)	None (funding fee instead)	Upfront + annual (0.35%)	PMI (removable at 20% equity)
Min. Credit Score	620+	620+	640+	620-680+
Property Restrictions	Minimal	VA MPRs	USDA-eligible areas only	Minimal
Best For	First-time buyers, moderate credit	Veterans and active military	Rural/suburban buyers	Good credit, long-term savings

Which Combination Is Best for You?

The right pairing depends on your personal circumstances:

• If you are a veteran or active-duty service member: VA + DPA is almost always the best option. Zero down payment, no mortgage insurance, and DPA covers your closing costs.
• If you are buying in a rural or suburban area: Check USDA eligibility first. If your area qualifies, USDA + DPA offers zero down and the lowest ongoing insurance costs.
• If you are a first-time buyer with a credit score of 620-660: FHA + DPA gives you the most flexibility on credit requirements and covers your full down payment.
• If you have a credit score above 680 and plan to stay long-term: Conventional + DPA may save you the most money over time because you can eliminate PMI once you build 20% equity.

Not sure which loan type is right for you? Our team can walk you through each option based on your specific financial profile. You can also take our quick eligibility quiz to get started.

How to Get Started

Regardless of which loan type you choose, the process for adding DPA is straightforward:

1. Check your eligibility for Texas DPA programs based on income, credit, and location
2. Get pre-approved with a lender experienced in DPA programs
3. Choose the right loan and DPA combination based on your goals
4. Complete a homebuyer education course (required by most DPA programs)
5. Close on your new home with reduced or zero out-of-pocket costs

The Cook Brothers Mortgage Team at Cornerstone First Mortgage specializes in pairing Texas DPA programs with the right loan type for every buyer. We handle DPA-paired loans every day and know how to structure your financing for the best outcome.

Ready to Get Started?

Finding the right loan and DPA combination can save you thousands of dollars upfront and over the life of your mortgage. Take our quick eligibility quiz to see which programs you qualify for, or contact us directly to discuss your options.

• Tanner Cook - 480-420-4918
• Zac Cook - 480-406-2016

Tanner Cook is a licensed mortgage loan originator (NMLS #2090424). This content is for informational purposes only and does not constitute financial advice. Loan approval is subject to credit and property qualification. Equal Housing Lender.