Down payment assistance programs in Austin Texas: Exact AMI limits and grant amounts for 2026

⏱️ 6 min read · Last updated: 2026

The offer for the house was $520,000. The lender said my 20% down payment required $104,000 in cash. I had $31,000 in savings. My wife and I, both public school employees, felt the dream of a first home in Austin slip away in a single phone call.

That was February 2025. By June, we had closed on a $495,000 townhome with $6,500 out of our own pocket, using a state grant program and an MCC tax credit. The math only worked because we matched with the right first mortgage pairing for our income.

What we actually qualified for with a combined income of $110,000

To understand what help is available, you first need your exact AMI percentage. The “area median income” for Austin-Round Rock-Georgetown is the gatekeeper for every program. In 2026, for a two-person household, 80% of AMI is set at $82,720. Our combined gross income of $110,000 was too high for the direct TSAHC grant—we were disqualified immediately.

The mistake most people make is assuming they qualify based on net take-home pay. Lenders use gross annual household income before taxes. We pivoted to the Southeast Texas Down Payment Assistance program, which targeted up to 115% of AMI in specific Travis County areas. We fell just within the $107,500 limit for our zip code (78745).

We received a forgivable second mortgage equal to 5% of our first mortgage ($470,250 loan on a $495,000 purchase), totaling $23,512 applied to closing costs. This is a 0% interest loan forgiven after three years of continuous occupancy. Sell or refinance before then, and you repay in full.

What down payment help can I get in Austin if I make $75,000?

If your income is lower, the path becomes more straightforward. For a single applicant earning $75,000 in 2026, you are within the 80% AMI limit ($62,040 for a 1-person household). Your best option is the Texas State Affordable Housing Corporation (TSAHC) down payment grant—up to 5% of your first mortgage loan amount.

For a $400,000 home with a 3.5% down FHA loan ($386,000 loan), you could qualify for a $19,300 grant. To secure it, use a TSAHC-approved lender and complete a homebuyer education course. The process typically takes 45 to 60 days.

1. Get a pre-approval letter from a TSAHC-approved lender in Austin.
2. Complete an 8-hour homebuyer education course (cost ~$99).
3. Submit your application with income documentation (W-2s, pay stubs, tax returns).
4. The lender underwrites both your first mortgage and the down payment grant concurrently.

Do I have to pay back down payment assistance in Texas?

Once you understand what you can receive, the next question is whether you’ll owe it back. The most common structure is the forgivable second mortgage. You do not repay it as long as you live in the home as your primary residence for three consecutive years. Selling, refinancing, or renting before that triggers full repayment.

The other major tool is the Mortgage Credit Certificate (MCC). Unlike the forgivable mortgage, the MCC is a federal tax credit you claim annually—it is never repaid. In 2026, it provides a credit of 20% of annual mortgage interest, capped at $2,000 per year. Over 30 years, that’s up to $60,000 in tax savings.

The MCC tax credit: the program most Austin buyers overlook

The MCC is a dollar-for-dollar reduction in your federal income tax liability—not a deduction. On our mortgage, we paid roughly $22,000 in interest the first year. The 20% credit produced a $4,400 benefit, but the annual cap is $2,000, which we claimed in full. The remaining $2,400 carried forward to the next tax year.

You apply through an approved lender simultaneously with your first mortgage. The household income requirement is at or below 80% AMI, and there is a one-time fee ($575 in our case) recovered after 3.5 months of claiming the credit. The MCC pairs with a conventional or FHA first mortgage—it is an add-on, not a standalone product.

Why was my down payment assistance application denied and how to fix it?

The most common reason for denial in Austin is an income calculation error that pushes you over the AMI threshold. Lenders count gross annual household income from all adults on the mortgage. A second job, overtime, or a spouse’s part-time income often disqualifies applicants who thought they were safely under the limit. In 2025, I saw a client denied because their bank deposits showed regular Venmo transfers from a side hustle they considered “not a real job.” The underwriter counted it as income.

Another frequent issue is an expired or non-approved homebuyer education certificate. The course must come from a HUD-approved counselor and be dated within 12 months of your application. A credit score below 620 (for FHA) is also a common barrier. Review your denial letter, correct the specific deficiency, and reapply with the same lender.

How long does the Austin down payment assistance process actually take?

The standard timeline from lender selection to closing is 45 to 75 days. Assistance programs do not add significant time because underwriting runs in parallel with your first mortgage. The longest step is gathering documentation: two years of tax returns, two months of bank statements, and verified employment history.

We started pre-approval in March 2025, were under contract in late April, and closed June 14. Plan for 60 days from offer acceptance to keys in hand to accommodate appraisal delays or documentation fixes.

What happens after 30 days with down payment assistance in Austin?

The first 30 days are front-loaded with preparation. Days 1 through 7 involve selecting an approved lender and gathering all income and asset documentation. A common misstep is applying for assistance after finding a house—you need the pre-approval letter before touring homes. By day 14, complete your homebuyer education course. From days 15 to 30, you are house hunting with full knowledge of your budget.

Once you have a ratified contract, the lender submits both applications to the state agency simultaneously. You will likely receive clear-to-close on the first mortgage first, then a separate approval for the assistance program 24 to 48 hours before closing.

Final numbers: What down payment assistance programs in Austin Texas actually delivered

Here is the exact financial breakdown from our 2025 purchase. Home price: $495,000. FHA loan with 3.5% down. First mortgage: $470,250. Forgivable second mortgage (DPA): $23,512 (5% of first mortgage). Total closing costs: $18,700. The DPA covered the entire shortfall, with a small surplus used to buy down our interest rate by 0.25%.

Our out-of-pocket cash was $6,500 from savings for earnest money and inspection repairs. Without these programs, we would have needed $104,000. The MCC will save us approximately $2,000 per year for 30 years—$60,000 total. The trade-off is a 3-year residency requirement. For us, the math was overwhelmingly positive.

As a first time home buyer in Austin, the most concrete step is to gather your last two years of tax returns and recent pay stubs, then contact a lender for a pre-approval that specifically includes down payment assistance. This step tells you exactly what you can afford and which programs are available in 2026.

Common Questions About down payment assistance programs in Austin Texas

The Bottom Line

For eligible Austin homebuyers in 2026, down payment assistance programs transform a six-figure cash requirement into a manageable out-of-pocket cost under $10,000. These programs require income verification and a three-year commitment, but the payoff is substantial. If your household income falls within the AMI thresholds, contact a TSAHC-approved lender for a pre-approval that evaluates your eligibility for both a forgivable second mortgage and the MCC tax credit. That conversation sets your realistic budget and pathway to homeownership.

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