Get a 0% Loan for Your Down Payment and Closing Costs as a First-Time Home Buyer in This City

by Natasha Gabrielle | Updated July 19, 2021 - First published on March 21, 2021

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This city makes it easier for first-time home buyers to purchase property. Check out the details of this 0% loan.

Buying a home is a big decision, and it's an investment that costs a lot of money. Because of this, many people put off taking out a mortgage loan and buying a home until they feel more financially secure. If you want to buy a house and are open to moving to a new area, then you may want to take a look at the city of Austin, Texas. There, first-time home buyers can take out a 0% loan to cover their down payment and closing costs. Keep reading to learn more about this first-time home buyer opportunity.

Living in Austin has its perks

Austin, Texas, is on the list of the top ten most affordable cities in the United States. Residents have a higher median household income and lower cost of living than people in most other cities.

Austin is always looking to attract more residents and buyers. Unfortunately, closing costs and down payments can lead to a large sum needed to cover any home buying expenses. Some people continue to rent because they feel they don't have enough money saved for a down payment. To help, the city created the Down Payment Assistance Program (DPA) to help new home buyers make their dream of owning a home a reality.

Taking advantage of this loan opportunity is a great way to make living in Texas as a first-time homeowner even more affordable.

How the program works

This program provides 0% interest loans to first-time home buyers. Loans can be used to cover closing costs, down payments, and prepaid expenses that come with buying a home.

Home buyers can qualify for up to $40,000 in assistance, depending on the type of loan chosen. A standard DPA loan will grant up to $14,999 with forgivable, 0% interest. A shared equity DPA is a forgivable, 0% interest loan up to $40,000 with shared equity. The actual loan amount is based on the borrower's demonstrated financial needs.

How does the loan forgiveness work?

  • Standard DPA loan: The loan is forgiven after five years. If the home is sold, refinanced, vacated, leased, or the title is transferred before that five years is up, the loan will need to be repaid after the sale or transfer.
  • Shared DPA loan: The loan is forgiven after 10 years. The shared equity remains and is forgiven after 30 years. If the home is sold, refinanced, vacated, leased, or the title is transferred before that 10 years is up, the loan will need to be repaid after the sale or transfer. Additionally, a percentage of the equity gained that is equal to the percentage of NHCD's portion of the original sale price will be added to the payoff balance.

Who is eligible?

First-time home buyers must meet the following eligibility requirements:

  • Must not have owned a home within the last three years or have been displaced as a result of divorce
  • Must buy a single-family home or condominium via the Austin Jurisdictions Web Map
  • The sale and appraisal price of the home must not exceed $280,000
  • Must complete the HousingSmarts program or another comparable home buyer education course
  • Must be approved for a mortgage loan from a participating lender
  • Must have a household income that is 80% or less than the Austin area median family income (MFI)
  • Must make a minimum $1,000 Earnest Money contribution

If you're interested in Austin's Down Payment Assistance program, you can fill out a program application package. If you want to buy a home but feel like homeownership is out of reach because you don't have the funds needed to pay for closing costs and a down payment, this kind of program might be a good fit for you.

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