Texas DPA vs FHA: Which Is Better for First-Time 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 minimal out-of-pocket costs. 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 reduce your out-of-pocket costs to nearly zero while still getting favorable loan terms
• The minimum credit score for most Texas DPA programs is 620, though some FHA options allow 580

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	Free money—no strings attached	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 home, 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 (versus 5-20% for conventional loans)
• Credit scores as low as 580 accepted with 3.5% 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.

The Math in Action

Let us walk through a real example:

Component	Without DPA	With Texas DPA
Home Price	$300,000	$300,000
FHA Down Payment (3.5%)	$10,500	$10,500
DPA Applied (5%)	$0	$15,000
Your Out-of-Pocket for Down Payment	$10,500	$0
Closing Costs (~3%)	$9,000	$9,000
DPA Applied to Closing Costs	$0	$4,500
Your Out-of-Pocket for Closing	$9,000	~$4,500
Total Cash Needed	$19,500	~$4,500

With DPA, the buyer saves approximately $15,000 in out-of-pocket costs. If the seller also provides concessions toward closing costs (common in many Texas markets), the buyer could close with just a few hundred dollars in earnest money and inspection costs.

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 are particularly attractive because they offer a true grant that never needs to be repaid. When combined with an FHA loan, you get the low down payment requirement of FHA covered entirely by grant funds.

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 prefer to avoid the slightly higher interest rates that some DPA programs carry
• You are purchasing a second home or investment property (DPA requires primary residence)

However, for most first-time buyers in Texas, combining DPA with FHA is the optimal strategy.

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	620 (for DPA programs)
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 only)

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?

DPA programs may carry interest rates that are 0.25% to 0.75% higher than the lowest available market rates. However, the $10,000-$15,000+ in assistance more than compensates for the slightly higher rate in most scenarios. Your loan officer can run both scenarios to compare total cost.

Can I use DPA with a VA loan instead of FHA?

Yes. All Texas DPA programs work with VA loans. Since VA loans require $0 down payment, the entire 5% DPA can be applied to closing costs, potentially reducing your out-of-pocket expense to nearly zero. This is an excellent option 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. Some FHA lenders offer DPA options with scores as low as 580, though options are more limited. According to TDHCA guidelines, a 620 score qualifies 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%) means you can close on a home with little to no money out of pocket. 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 - (480) 420-4918
• Zac Cook - NMLS #2111496 - (480) 406-2016

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.