Looking to buy a home in Austin but struggling with a down payment? Here’s a quick guide to the top low-down-payment mortgage options available in the area. These programs are designed to help first-time buyers and those with limited savings enter Austin’s competitive housing market.
- FHA Loans: Down payment as low as 3.5% for credit scores ≥580. Requires mortgage insurance.
- VA Loans: No down payment, no monthly mortgage insurance. Available to eligible veterans and active-duty service members.
- USDA Loans: Zero down payment for homes in USDA-designated rural areas near Austin. Income limits apply.
- 3% Down Conventional Loans: Great for urban areas with no location restrictions. Requires private mortgage insurance until 20% equity.
- 1% Down Payment Programs: Rare but worth exploring through local lenders.
- Austin Down Payment Assistance: Local programs offering financial help for qualifying buyers.
Quick Comparison
| Loan Type | Down Payment | Credit Score | Income Limits | Mortgage Insurance | Special Requirements |
|---|---|---|---|---|---|
| FHA Loan | 3.5% (≥580) / 10% (500–579) | 500+ | None | Required | Property must meet FHA standards |
| VA Loan | 0% | No strict minimum | None | Not required | Must meet military service eligibility |
| USDA Loan | 0% | 640+ | Yes | Annual fee applies | Property in USDA-eligible rural area |
| Conventional 97 Loan | 3% | 620+ | None | Required if <20% equity | Often aimed at first-time buyers |
| 1% Down Programs | 1% | Varies | Varies | Included or embedded | Available through specific lenders |
These options make homeownership more accessible in Austin. Read on for details about each program and tips to get started.
1st Time Home Buyer Grants up to $20K
1. FHA Loans
FHA loans are insured by the Federal Housing Administration and are a popular choice for first-time homebuyers in Austin. These loans require a smaller down payment – just 3.5% for credit scores of 580 or higher. For credit scores between 500 and 579, a 10% down payment is needed. They also allow gift funds and offer competitive interest rates.
Key Details:
- Down Payment: 3.5% for credit scores ≥580; 10% for scores 500–579
- Gift Funds: Permitted; sellers can contribute up to 6% toward closing costs
- Mortgage Insurance: Upfront MIP of 1.75%, plus annual MIP paid monthly
- Property Requirements: Must be a primary residence with an FHA-approved appraisal (includes condos)
- Employment and Income: At least 2 years of stable employment, documented income and assets
- Debt-to-Income Ratio (DTI): Up to 43%, or 50% with additional qualifying factors
Up next, learn about VA loans and their zero-down payment benefit.
2. VA Loans
VA loans, supported by the U.S. Department of Veterans Affairs, allow veterans, active-duty service members, and eligible surviving spouses to purchase homes in Austin with no down payment.
Key Benefits
- Zero down payment required
- No monthly mortgage insurance
- Competitive interest rates compared to conventional loans
- VA limits on closing costs
- Flexible credit standards
VA Funding Fee
Instead of monthly mortgage insurance, VA loans require a one-time funding fee. The fee amount varies based on factors like service type, loan purpose, and down payment size. Veterans with service-connected disabilities and eligible surviving spouses are exempt from this fee.
Qualification Requirements
To qualify for a VA loan, you’ll need to:
- Meet service requirements (e.g., 90 days during wartime, 181 days during peacetime, six years in the National Guard/Reserves, or be an eligible surviving spouse)
- Obtain a Certificate of Eligibility (COE)
- Purchase a VA-approved primary residence (including single-family homes, condos, or properties with up to four units)
- Demonstrate stable income and meet acceptable debt-to-income (DTI) ratios
Austin-Specific Considerations
Austin’s competitive housing market makes VA loans an attractive option for veterans and service members who may not have upfront savings. In Travis County, loan limits align with FHFA conforming limits. Buyers can still finance amounts above these limits by providing a down payment.
Next, we’ll take a closer look at USDA loans, another no-down-payment option for eligible borrowers in the Austin area.
3. USDA Loans
USDA loans, backed by the U.S. Department of Agriculture, offer a zero-down payment option for low- to moderate-income buyers in specific areas around Austin. This program is particularly helpful for those looking to purchase homes in the outskirts of Travis, Hays, and Bastrop counties, expanding opportunities beyond the city center.
Key Details:
- Down Payment: None required (0%)
- Eligibility: Home must be in USDA-designated rural zones near Austin, including parts of Travis, Hays, and Bastrop counties
- Income Limits: Household income cannot exceed 115% of the area’s median income for Travis County
- Guarantee Fee: 1% upfront fee, plus 0.35% annually
- Loan Terms: Fixed 30-year term with competitive interest rates
Property and Income Guidelines
To qualify, the home must be located in a USDA-eligible rural area and serve as the buyer’s primary residence. The property must also meet USDA standards. Income verification ensures the program benefits low- to moderate-income households, staying true to its purpose.
Next, we’ll explore 3% down conventional loans, which are ideal for buyers in Austin’s urban and suburban neighborhoods.
sbb-itb-4c99469
4. 3% Down Conventional Loans
Conventional loans with a 3% down payment are a great option for buyers who don’t qualify for government-backed programs. Unlike USDA loans, they don’t have location restrictions. These loans are supported by Fannie Mae and Freddie Mac, making them accessible to a wide range of buyers.
Key Features
- Down Payment: 3% of the purchase price
- Private Mortgage Insurance (PMI): Required until you reach 20% equity
- Credit Score: Minimum of 620, though a score of 680 or higher can secure better rates
- Debt-to-Income Ratio: Up to 45%
- Income Limits: None for standard conventional loans
Popular Programs
Here are two popular options for 3%-down conventional loans:
-
Fannie Mae HomeReady
Designed for first-time buyers, this program requires your income to be no more than 80% of the Area Median Income (AMI). It offers lower PMI rates than standard conventional loans and even considers non-borrower household income for qualification. -
Freddie Mac Home Possible
Similar to HomeReady but with slightly different rules, this program is aimed at low- to moderate-income buyers. It allows rental income from accessory units (like basement apartments) and requires at least one borrower to complete homebuyer education.
Cost Breakdown
Let’s look at the costs for a median-priced home in Austin ($565,000 as of April 2025):
- Down Payment (3%): $16,950
- Monthly PMI: $225–$350
- Principal & Interest: $3,450–$3,750
- Total Cash at Closing: $25,000–$30,000
Property Requirements
To qualify, the property must meet these criteria:
- Be your primary residence
- Be a single-family home, condo, or townhouse
- Fall within the conventional loan limits for Travis County
- Meet basic condition standards
These loans are ideal for areas like Mueller, South Congress, or East Austin, where USDA loans aren’t available.
Up next: 1% down payment options.
5. 1% Down Payment Options
Mortgages requiring only a 1% down payment are hard to come by in Austin. It’s worth checking with local lenders to see if they’re offering any special promotions.
You can also look into local programs that provide down payment assistance in Austin for additional support.
6. Austin Down Payment Help Programs
Austin homebuyers have access to several programs designed to ease the burden of upfront costs. These include options from the City of Austin, the Texas Department of Housing and Community Affairs (TDHCA), and the Austin Housing Finance Corporation (AHFC).
Common Requirements
To qualify for most of these programs, you’ll generally need to meet the following criteria:
- Your income must fall below the area median.
- The property must be within specific boundaries.
- You must be a first-time homebuyer.
- Completion of a HUD-approved homebuyer education course is mandatory.
Some programs also prioritize funds for public servants, such as teachers, firefighters, law enforcement officers, and healthcare workers.
How to Apply
Here’s a quick overview of the application process:
- Take a HUD-approved homebuyer course and gather necessary documents, including tax returns, pay stubs, bank statements, and proof of income.
- Get preapproved by a lender participating in the program.
- Find a property that qualifies and submit your application.
Since funding is limited and awarded on a first-come, first-served basis, it’s a good idea to apply as early as possible. An Austin Local Team agent can help you navigate the eligibility criteria and simplify the process.
Mortgage Options at a Glance
Before applying for a mortgage, it’s crucial to compare different programs side by side to find what works best for your situation.
Here’s a quick comparison of key mortgage details:
| Loan Type | Down Payment | Credit Score | Income Limits | Mortgage Insurance | Special Requirements |
|---|---|---|---|---|---|
| FHA Loan | 3.5% (≥580) / 10% (500-579) | Minimum 500 | None | Required | Property must meet FHA standards |
| VA Loan | 0% | No strict minimum | None | Not required | Must meet military service eligibility |
| USDA Loan | 0% | Minimum 640 | Set by USDA | Annual fee applies | Property must be in an eligible rural area |
| Conventional 97 | 3% | Minimum 620 | Standard limits | Required if down payment <20% | Often aimed at first-time buyers |
| 1% Down Programs | 1% | Varies by program | Varies | Included or embedded | Available through specific lenders |
Other costs to consider: Closing costs (typically 2-5% of the loan amount), property taxes, homeowners insurance, and HOA fees if applicable.
Once you’ve reviewed these details, you’re ready to move on to the application process in "Next Steps."
Next Steps
Now that you’ve identified your top mortgage option from the comparison above, here’s what to do next:
Check Your Eligibility
Start by reviewing your qualifications for the mortgage option you’ve chosen. This step ensures you’re ready to move forward smoothly.
Work With Austin Experts
Team up with professionals familiar with Austin’s neighborhoods and lending landscape. A seasoned local agent can guide you in narrowing your home search and fine-tuning your financing plan. They’ll provide insights tailored to the Austin market.
