Texas DPA vs FHA: Which Is Better for First-Time Buyers?
Understand the difference between Texas DPA and FHA loans. Learn how down payment assistance and FHA loans work together to help first-time Texas home buyers.
Texas DPA vs FHA: Understanding the Difference
Texas Down Payment Assistance (DPA) and FHA loans are not competing options—they work together to help first-time buyers purchase homes with far less of their own cash. According to TSAHC, 9,554 Texas families used DPA programs in 2025 to receive $85.6 million in down payment assistance, with the majority pairing that assistance with FHA financing.
If you have been researching how to buy a home with little money down, you have likely encountered both terms. This guide explains exactly how Texas DPA and FHA loans complement each other, when to use each option, and how to maximize your benefits as a first-time buyer.
Key Takeaways
- Texas DPA provides money for your down payment and closing costs—it is not a loan type but assistance that layers on top of your mortgage
- FHA is a type of mortgage loan backed by the Federal Housing Administration with flexible credit requirements
- You can (and often should) use both together—Texas DPA programs are specifically designed to pair with FHA loans
- Using DPA with FHA can cover the 3.5% down payment and part of your closing costs, so far less of your own savings goes into the purchase
- The minimum credit score for most Texas DPA programs is 620, even when FHA alone would accept a lower score
What Is Texas Down Payment Assistance?
Texas Down Payment Assistance is financial help provided by state housing agencies to cover your down payment and closing costs. The two primary agencies are:
- TDHCA (Texas Department of Housing and Community Affairs) offers the My First Texas Home and My Choice Texas Home programs
- TSAHC (Texas State Affordable Housing Corporation) offers the Homes for Texas Heroes and Home Sweet Texas programs
DPA is delivered in three main forms:
| DPA Type | Description | Repayment Required |
|---|---|---|
| Grant | Assistance you don't pay back; the first mortgage that comes with it is usually priced higher | No, never |
| Forgivable Second Lien | Loan forgiven after 3 years of occupancy | No, if you stay 3 years |
| Deferred Second Lien | Due when you sell, refinance, or pay off mortgage | Yes, eventually |
According to TDHCA guidelines, Texas DPA programs provide up to 5% of your loan amount toward down payment and closing costs. On a $300,000 loan, that is up to $15,000 in assistance.
What Is an FHA Loan?
An FHA loan is a mortgage insured by the Federal Housing Administration. It is not government money—you still borrow from a private lender—but the FHA insurance allows lenders to offer more flexible terms.
Key FHA loan features:
- Minimum 3.5% down payment (conventional minimums start at 3% to 5% depending on the program)
- A 580 credit score is FHA's cutoff for the 3.5% minimum down payment (500-579 requires at least 10% down)
- More flexible debt-to-income ratios than conventional loans
- Mortgage insurance required (both upfront and monthly premiums)
- Property must meet FHA standards for safety and habitability
FHA loans are the most popular loan type among first-time buyers because of their accessibility. According to HUD data, FHA loans account for approximately 30% of all purchase mortgages for first-time buyers nationwide.
How Texas DPA and FHA Work Together
Here is the critical insight: Texas DPA and FHA loans are designed to work together. DPA is not an alternative to FHA—it is a supplement that covers the costs FHA requires you to pay.
How the Pieces Fit at Closing
Here is the order in which the money usually gets applied when you pair Texas DPA with an FHA loan:
- The FHA down payment comes first. FHA requires at least 3.5% of the purchase price, and the assistance (up to 5% of the loan amount) is applied there before anything else.
- Whatever is left goes to closing costs. Lender fees, title charges, prepaid taxes and insurance, and escrow deposits can all draw on the remaining assistance.
- Seller concessions can close the gap. If your contract includes a seller credit toward closing costs, it reduces what you bring to the table.
- Some items are still on you. Earnest money, the inspection and the appraisal are usually paid before closing, so budget for them even if the assistance covers the rest.
Once you have a property under contract, your Loan Estimate itemizes the expected cash to close, and your Closing Disclosure confirms the final figure before you sign.
Comparing DPA Types with FHA Loans
All four major Texas DPA programs work with FHA loans. Here is how they compare:
| Program | Agency | Works with FHA | Grant Option | First-Time Required |
|---|---|---|---|---|
| My First Texas Home | TDHCA | Yes | No | Yes |
| My Choice Texas Home | TDHCA | Yes | No | No |
| Homes for Texas Heroes | TSAHC | Yes | Yes | No |
| Home Sweet Texas | TSAHC | Yes | Yes | No |
TSAHC programs stand out because they offer a true grant that never needs to be repaid. Paired with an FHA loan, the grant can cover FHA's low down payment requirement, in exchange for somewhat higher pricing on the first mortgage.
When to Choose FHA Without DPA
There are situations where using an FHA loan without DPA makes sense:
- Your income exceeds DPA program limits (varies by county, typically $80,000-$127,000 for 1-2 person households)
- The home price exceeds DPA purchase limits (varies by county, typically $300,000-$400,000+)
- You have enough cash and would rather skip the pricing adjustment that often comes with a DPA first mortgage
- You are purchasing a second home or investment property (DPA requires primary residence)
For many first-time buyers in Texas, though, combining DPA with FHA is the most practical route.
When to Choose Conventional Over FHA
While FHA loans are popular, conventional loans may be better in some cases:
| Factor | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum Credit Score | 580 for 3.5% down (500-579 needs 10% down) | 620 with TDHCA My Choice; 640 with TSAHC |
| Down Payment | 3.5% | 3% (with some programs) |
| Mortgage Insurance | Required for life of loan | Removable at 20% equity |
| Upfront MI Premium | 1.75% of loan | None |
| Property Requirements | Stricter FHA standards | Less restrictive |
| Works with Texas DPA | Yes (all programs) | Yes (TSAHC and TDHCA My Choice, among others) |
If you have a credit score above 700 and plan to stay in the home long-term, a conventional loan with TSAHC DPA might save you money on mortgage insurance over time.
Step-by-Step: Using Texas DPA with an FHA Loan
Step 1: Check Your Eligibility
Use our qualifier quiz to see which DPA programs you may qualify for. Key requirements include:
- Minimum credit score of 620 (most programs)
- Household income below county limits
- Home price below purchase price limits
- Primary residence occupancy
- Completion of homebuyer education course
Step 2: Get Pre-Approved
Work with a DPA-approved lender like Cook Brothers Mortgage Team at Cornerstone First Mortgage (NMLS #173855). We will verify your eligibility for both FHA financing and Texas DPA programs.
Step 3: Complete Homebuyer Education
All Texas DPA programs require a homebuyer education course. This can be completed online in a few hours and costs $0-$100.
Step 4: Find Your Home
Shop for homes within the purchase price limits for your county. Your lender will provide specific limits during pre-approval.
Step 5: Close with DPA Applied
At closing, your DPA funds are applied directly to your down payment and closing costs. You sign one set of documents that includes both your FHA loan and the DPA assistance.
Common Questions About DPA and FHA
Do I have to pay back Texas DPA?
It depends on the program. TSAHC grants never need to be repaid. TDHCA forgivable second liens are forgiven after 3 years of living in your home. Deferred second liens are due when you sell, refinance, or pay off the first mortgage. According to TDHCA program guidelines, no monthly payments are required on the DPA portion regardless of type.
Will using DPA affect my FHA interest rate?
It can. A first mortgage paired with state DPA is often priced somewhat higher than a standard FHA loan without assistance, and a grant option is usually priced higher than a second lien option. Whether the assistance outweighs that cost depends on how long you keep the loan. Ask your loan officer to price the same house with and without DPA and compare the APR, the monthly payment and your cash to close on each.
Can I use DPA with a VA loan instead of FHA?
Yes. All Texas DPA programs work with VA loans. Since VA loans have no down payment requirement, the assistance can go entirely toward closing costs, which can cover a large share of what you'd otherwise bring to closing. It's a strong pairing for eligible veterans.
What credit score do I need for Texas DPA with FHA?
Most Texas DPA programs require a minimum credit score of 620 for FHA loans. FHA's own guidelines go lower, but that doesn't lower the assistance program's minimum, so a score under 620 generally means FHA without state assistance. According to TDHCA guidelines, a 620 score meets the credit floor for all major DPA programs.
Is Texas DPA only for first-time buyers?
No. While TDHCA's My First Texas Home program requires first-time buyer status (no homeownership in past 3 years), three other programs—My Choice Texas Home, Homes for Texas Heroes, and Home Sweet Texas—are available to repeat buyers.
How much can I receive from Texas DPA?
Texas DPA programs provide up to 5% of your loan amount. On a $300,000 home with an FHA loan, that is approximately $14,475 in assistance (5% of the 96.5% loan amount). According to TSAHC 2025 data, the average DPA amount was approximately $8,960 per household.
The Bottom Line
Texas DPA and FHA loans are complementary tools that work together to help first-time buyers purchase homes with minimal cash. You do not have to choose between them—use both.
The combination of FHA's low down payment requirement (3.5%) and Texas DPA's assistance (up to 5% of the loan amount) means the assistance can cover your down payment and part of your closing costs, so you bring far less cash to closing. In 2025, TSAHC alone helped 9,554 Texas families do exactly this, providing $85.6 million in down payment assistance paired primarily with FHA and VA financing.
If you are a first-time buyer in Texas wondering how to afford a home, the answer is likely already in front of you: FHA loan + Texas DPA.
Ready to Get Started?
Take our free qualifier quiz to see which Texas DPA programs you qualify for. You can also call us directly to speak with a DPA specialist.
- Tanner Cook - NMLS #2090424 - (469) 405-2690
- Zac Cook - NMLS #2111496 - (469) 405-2690
Tanner Cook is a licensed mortgage loan originator (NMLS #2090424) with Cook Brothers Mortgage Team at Cornerstone First Mortgage (NMLS #173855). 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.
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