Stacking Texas DPA with a VA loan
Mike Certo · Cornerstone First Mortgage · NMLS #260555 ·
VA loans don't require a down payment. So why would a Veteran stack a down payment assistance (DPA) grant on top? Two reasons. Closing costs. Texas DPA programs that cover closing costs let you walk into the house with truly zero out-of-pocket. And principal paydown — putting the grant money toward principal means a lower monthly payment from day one, with no impact on your funding fee tier.
Most national VA lenders ignore Texas DPA entirely. Their loan officers don't know which programs allow VA layering, which require a separate second-lien application, or which counties have Veteran-specific bonus amounts. This is exactly the kind of TX-specific knowledge gap a state specialist closes.
The real DPA programs that pair with VA in Texas
TSAHC Homes for Texas Heroes (statewide)
Assistance available: Down payment and closing-cost help worth up to 5% of the loan amount, taken as a grant (never repaid) or a deferred, forgivable second lien (only repaid if you sell or refinance within three years). Veteran angle: Veterans are an eligible "hero" category alongside teachers, first responders, and corrections officers — so a Veteran qualifies on service alone, no first-time requirement. Funds cover closing costs, the funding fee, or a principal contribution in any combination. Income/price limits (2026): Set per county by the Texas State Affordable Housing Corporation; both an income cap and a purchase-price cap apply. Run the county test before you write an offer. Credit minimum: 620. Most active-duty and recent Veterans clear this easily. Where it shines: Texas VA buyers who want the grant toward closing costs so a seller credit can go to a rate buydown instead.
TDHCA My First Texas Home (statewide)
Assistance available: Up to 5% of the loan amount in down payment and closing-cost assistance through the Texas Department of Housing and Community Affairs, often paired with a Mortgage Credit Certificate (MCC). Veteran angle: The program is normally first-time-buyer only, but Veterans are exempt from the first-time requirement — a repeat-buyer Veteran can still use it. Income limit (2026): Roughly $97,000 for a 1–2 person household and $111,550 for 3+, higher in metros like Austin and Dallas. County purchase-price caps also apply. Credit minimum: 620. Where it shines: First-time or returning Veteran buyers who also want the MCC's annual federal tax credit on mortgage interest.
TSAHC Home Sweet Texas + local programs
Assistance available: Home Sweet Texas offers the same up-to-5% structure for any qualifying buyer under the income limit who isn't in a "hero" profession. Local layers exist too — SETH (Southeast Texas Housing), the City of Dallas program, and others. Veteran angle: Useful when a Veteran's spouse is the primary borrower or when household income or property location fits a local program better. Income limit: Set per county; generally similar to the statewide caps. Credit minimum: 620. Where it shines: Buyers in a specific city with a dedicated grant, or households that don't fit the hero categories. One DPA program per transaction — Mike picks the single best fit, not a stack.
The funding fee math when you stack
A VA loan with $0 down + first-time use carries a 2.15% funding fee. On a $475,000 purchase that's $10,213. Most Veterans finance the fee into the loan, so the actual loan amount becomes $485,213.
If you take a 5% TSAHC grant (about $23,750 on the $475K purchase) and apply it to closing costs + funding fee, your true out-of-pocket can drop to zero even after paying for the appraisal and inspection. Mike has closed deals where the Veteran walked in with $0 wired and walked out with the keys plus a refund check at the table from the lender credit.
Better play for buyers who do have savings: apply the grant to principal and start month one with a lower P&I. On the same $475K purchase, applying the full 5% grant to principal meaningfully lowers your monthly principal-and-interest payment from day one.
Things that go wrong (avoid these)
- DPA officer doesn't know VA overlays. Some DPA lenders aren't VA-approved sponsors. Pick a loan officer who can run BOTH products under one underwrite, not two.
- AMI miscalc on combined incomes. Vets with a working spouse sometimes lose the DPA on income alone. Run the AMI test before you fall in love with a home.
- Funding fee waiver math. If you have a 10%+ disability rating, your funding fee is waived. Don't let the loan officer add it back as a "convenience fee" — that's a different fee with different lender rules.
- Repayment trigger on the forgivable second. If you choose the deferred forgivable-second option instead of the grant, it forgives over three years of occupancy. Sell or refinance before then — or PCS out of state in year two — and you can owe it back. If your timeline is short, take the grant option instead.
- MCC overlap. Mortgage Credit Certificates (federal tax credit on mortgage interest) can stack with VA + DPA. Most lenders skip these entirely. The combined annual savings on a $475K VA loan at typical current rates can be $2,000+ in your first three tax years.
Real example — Fort Hood E-6 with a disability rating
Active-duty E-6 at Fort Hood, married, two dependents, 30% VA disability rating, buying a $340,000 home in Harker Heights (Bell County). Used a 5% TSAHC Homes for Texas Heroes grant on his service alone.
- Base loan: $340,000 (no down, $0 funding fee — waived for service-connected disability)
- DPA grant: $17,000 applied as a principal contribution
- Loan amount after DPA application: $323,000
- Monthly principal & interest: rate-dependent — current figures available on request
- Plus Bell County property tax (illustrative, confirm current rate)
- Plus Texas homeowners insurance
- BAH (E-6 with dependents, Fort Hood/Killeen MHA — confirm current rate)
For most active-duty buyers near Fort Hood, the BAH plus BAS covers the full payment with room to spare, and out-of-pocket cash at closing comes down to the appraisal, inspection, and escrow setup. This is a real-world deal structure Mike has closed multiple variants of. Exact numbers depend on the current rate and the county tax and insurance figures at the time you buy.
Frequently asked questions
Can I use Texas DPA on a VA loan above the conforming limit?
Texas DPA programs cap by loan amount and county purchase-price limit, not by the conforming limit. Above the program cap you can still use a VA loan with full entitlement, just without the DPA layer. Run the math both ways with Mike.
Does using DPA hurt my VA entitlement?
No. The DPA is a separate second lien from a state agency. Your VA first mortgage uses entitlement; the DPA does not. You preserve full future-purchase entitlement.
What if I PCS in two years — do I owe the grant back?
It depends on how you took the assistance. TSAHC and TDHCA let you choose a grant (never repaid) or a deferred, forgivable second lien that is only repaid if you sell or refinance within three years. Read the option you select carefully before closing. PCS orders sometimes qualify for relief, sometimes do not.
Can I refinance later and keep the DPA?
Yes for a VA IRRRL streamline — the second lien gets subordinated. For a cash-out refinance that pulls equity, the lender will usually require you to pay off the second first. Plan accordingly.
Are there any Texas DPA programs that exclude VA loans?
Some local-jurisdiction DPA programs (certain city-specific grants) require an FHA or conventional first lien. The statewide programs — TSAHC Homes for Texas Heroes and TDHCA My First Texas Home — allow VA first liens. Mike maintains a current list of which jurisdictions accept VA layering.
Need Mike to model your specific scenario? Send your numbers via the contact form or call (480) 296-6513.