Houston Home Financing Guide — Loans, DPA & Closing Costs

Financing question path

This page organizes financing questions; it does not approve a loan, quote a rate, determine eligibility, or give legal, tax, or insurance advice.

Conventional Loan — Low Down Payment, PMI, and Qualification

Conventional loans may allow a down payment as low as 3% for eligible borrowers, subject to the loan program, lender, credit profile, occupancy, and property. Private mortgage insurance (PMI) may apply when the down payment is below 20%; cancellation and termination depend on the loan terms and applicable requirements. Houston buyers should compare the lender's full payment estimate, not only the interest rate.

Seller concessions and builder credits may reduce eligible closing costs, subject to the loan program, lender, contract, and transaction limits. The written offer and Loan Estimate should identify how credits affect cash-to-close.

FHA Loan — Down Payment, MIP, and Qualification

FHA financing may allow a 3.5% down payment for borrowers who meet current FHA and lender requirements. Mortgage insurance premiums (MIP) include upfront and annual components whose amount, duration, and cancellation rules depend on the loan profile and current program guidance. Houston buyers should confirm the exact premium and qualification requirements with an FHA-participating lender.

FHA financing may permit seller or builder contributions within current interested-party contribution rules. The applicable limit depends on the program and transaction; ask the lender how a proposed credit affects the Loan Estimate and cash-to-close.

VA Loan — Eligibility, Funding Fee, and Mortgage Insurance

VA loans may permit zero down payment and do not use monthly private mortgage insurance. Eligible veterans, active-duty service members, and surviving spouses may owe a one-time VA funding fee. The fee varies by entitlement, down payment, prior use, loan type, and exemption status. Disabled veterans may qualify for a waiver. Confirm current eligibility and fees with the U.S. Department of Veterans Affairs and a participating lender.

VA transactions have specific rules for seller contributions and allowable closing costs. A Houston-area builder or seller may offer credits, but the lender must confirm whether the proposed structure is permitted and how it changes cash-to-close.

USDA Loan — Exact-Address Eligibility

USDA Rural Development loans may offer zero down payment for eligible borrowers purchasing a property in a designated rural-eligible area. Eligibility depends on the exact address, household income, loan limits, property use, and current USDA rules. USDA loans can include an upfront guarantee fee and an annual fee; confirm current amounts with USDA and a participating lender.

Verify USDA eligibility for a specific property address using the USDA eligibility tools. Do not assume that a county, subdivision, or master-planned community qualifies without checking the exact address and current program rules.

Rate Buydowns & Mortgage Points — Pay Now or Pay Later?

A temporary rate buydown lowers the interest rate for a defined period when the lender, builder, seller, contract, and loan structure permit it. Some Houston-area builders offer 2-1 structures, but availability, note rate, subsidy, and eligibility vary. Compare the temporary payment with the permanent note rate and confirm the terms in writing before relying on the payment estimate.

Mortgage points — also called discount points — permanently reduce your interest rate only when the lender's pricing provides that benefit. A point is commonly priced as a percentage of the loan amount, but the rate reduction varies by lender, loan, and market. Ask the lender for the cost, monthly savings, and break-even period rather than relying on a universal conversion.

Down Payment Assistance — TSAHC and Local Programs

Down payment assistance (DPA) programs may reduce the cash required at closing for qualified buyers. The Texas State Affordable Housing Corporation publishes current program information for eligible Houston-area buyers. Program names, income limits, purchase-price limits, occupations, lender participation, and repayment terms can change. Confirm current eligibility with a participating lender.

Eligibility depends on income, purchase price limits, credit profile, occupancy, and the buyer's situation. Program limits vary by county and program year. Some Houston-area municipalities or housing finance organizations may also offer assistance. Ask a participating lender which current programs fit the transaction.

DPA may pair with FHA or conventional financing, but stacking rules depend on the program, lender, seller, builder, and contract. Verify current program availability, income limits, lender participation, and repayment terms before writing an offer.

Earnest Money, Closing Costs & Seller Concessions

Earnest money is a negotiated deposit whose amount, delivery, escrow handling, credit at closing, and potential forfeiture depend on the signed contract. The Texas option period is also contract-specific; its fee, deadlines, inspection rights, and termination procedure should be reviewed with your buyer agent, broker, or attorney before signing.

Closing costs vary by lender, title company, property, loan program, taxes, insurance, and negotiated credits. Costs can include lender fees, title charges, appraisal, survey, HOA transfer fees, and prepaid taxes or insurance. Seller concessions and builder incentives may reduce cash-to-close when the lender and contract allow them. Ask the lender for a current Loan Estimate and compare it with the written offer.

An appraisal gap occurs when the appraised value comes in below the contract price. The buyer's choices depend on the appraisal, financing, contingency, contract, lender, and negotiation. Do not assume that new construction or resale properties will produce or avoid an appraisal gap.

Property Taxes & the Homestead Exemption

Houston-area property tax rates vary by address, tax year, county, city, school district, MUD, and other special districts. MUD bonds fund water, sewer, and drainage infrastructure in some communities. Identify every taxing entity on the current tax record rather than relying on a general builder estimate.

A primary residence may qualify for a residence homestead exemption. Review Texas Comptroller exemption guidance and the applicable appraisal district's current requirements. The exemption, if approved, changes the taxable value used for eligible taxes; the lender's escrow estimate may update later.

MUD and PID taxes affect your monthly payment — understand the full property tax structure before choosing a community.