First Time Home Buyers: The City of Austin May Pay All Closing Costs

Make Under $43K a Year? The City May Pay Your Closing Costs with the city of Austin’s “Down Payment Assistance” program.

A lack of funds for closing costs is a significant obstacle to buying a home. I recently had a client ask me about Austin’s Down Payment Assistant program. I realized not many people knew much about this program, including myself. Although there is information about it through AustinTexas.gov, it was a little confusing. I wanted to provide straightforward and easy to understand information about this program. Hopefully, a few of you can use it!

This program will pay for your down payment and closing costs, and pre-paid expenses associated with buying a home. The dollar amount provided is based on your financial need. So you’ll need to talk to a lender and then apply to the program before knowing how much you’re qualified for.

FIRST a brief lesson on closing costs and down payments.

The Skinny on Closing Costs.

  • A down payment is the amount of money a buyer pays at closing to fund a home purchase. It’s usually expressed as a percentage of the total home price and can be as little as 3% of the sales price on Conventional 1st-time buyer loans.
    • A DOWN PAYMENT IS NOT CONSIDERED A CLOSING COST.
  • Closing costs are fees paid at the closing of a real estate transaction:
    • Lender fees: The cost will depend on your lender. Just ask them what they charge. To give you a number to go off of, I’ve worked with a lender who charges $1,370, no matter the size of the loan.
    • Appraisal: The cost varies and can be as little as $275. In the Austin market, they are typically $400-$495 as surveyors are in high demand.
    • Inspection: The cost varies and can be as little as $240
    • Prepaid expenses (tax/ insurance/ daily interest charges)
  • You can put as little as 3% down payment on a home.
    • For a $200K home that’s $6K and not everybody has 6K laying around.
    • If you don’t qualify for Austin’s “Down Payment Assistance” program and don’t have enough money for a down payment, it may be gifted to you by a family member.
  • Gift funds should be wired at the time of close. This is by far the most simple method for a conventional loan.
  • You will pay most of your closing costs on closing day. Closings are usually 30-45 days after your contract is accepted.
  • You will pay your inspection & appraisal before close.

The Skinny on the Down Payment Assistance Program:

  • You must NOT have owned a home in the last three years
  • You must meet a lender’s qualifications:
    • Do you have a decent credit score?
    • Do you have a salary job or strong job history?
    • What’s your debt to income ratio? Do you have a lot of debt?
  • You must use one of the programs designated lenders. Luckily there are many options to choose from.
  • The price of your home needs to be below $243K…your lender will let you know what you qualify for.
  • The standard down payment assistance they provide is up to $14,999…if you need more and qualify for more they will pay for up to $40,000, but this will come with more restrictions.
  • You must purchase a home, condo or townhouse within the Austin City Limits.
  • You must complete the free HousingSmarts course. It will take up a few hours of a Saturday.
  • Your total household income cannot exceed 80 percent of the Area Median Income. Read the chart below to see if your income amount will qualify.

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Think you qualify? Now, what?

The first place I’d start is to apply with one of these lenders (contact me, and I’ll send you the list). Make sure you qualify for a loan in general. Call all of them until you find one that communicates well with you. You should find somebody who will answer your emails promptly. Ask them what their preferred method of communication is. With poor communication, the approval process may take a long time, and you need to work with somebody who will move quickly if you’re in a time crunch. Once the lender has you fully approved, and your application is ready to submit to the city, the DPA application process may take an additional 30 days. Just keep that in mind!


If you’d like some assistance along your home buying journey, feel free to reach out. My services cost nothing to you, and it’s good to have somebody walking you through this process. If you found this article helpful, you can read more on my blog. You can also search for homes and find neighborhood guides on my website.