Think you need 20 percent down to buy in McKinney? You have more options than you might think. Many Collin County buyers purchase with 0 to 3.5 percent down using well-known loan programs and Texas assistance. If you want clarity on what fits your budget and timeline, you are in the right place. In this guide, you will learn the core paths to a low down payment, how Texas assistance works, what you need to qualify, and the documents to gather. Let’s dive in.
How little you can put down
Most first-time and move-up buyers in McKinney use one of three paths: FHA, VA, or a conventional loan with 3 percent down. Each option has different upfront cash needs, monthly costs, and eligibility rules. Your best fit depends on your credit profile, income, and how long you plan to keep the loan.
FHA at a glance
- Typical down payment: 3.5 percent for many borrowers with credit scores around 580 and above. Lower scores may require 10 percent down.
- Mortgage insurance: An upfront mortgage insurance premium is common and can be financed, plus an annual premium paid monthly. The duration of the premium depends on factors like your loan-to-value and when your loan is endorsed.
- Good fit: Buyers who need flexible credit guidelines and a modest down payment. Note that FHA has property condition standards, and some condos or homes may not qualify.
VA at a glance
- Typical down payment: 0 percent for eligible veterans, active-duty service members, and some surviving spouses.
- Fees and insurance: No monthly PMI. A one-time funding fee usually applies, which can be financed. Disabled veterans may be exempt.
- Good fit: Eligible borrowers seeking the lowest upfront cash requirement with primary residence occupancy.
Conventional 3 percent at a glance
- Typical down payment: As low as 3 percent for qualified borrowers through programs such as Fannie Mae HomeReady or Freddie Mac Home Possible.
- Mortgage insurance: PMI applies but can be cancelled once you reach sufficient equity, with automatic termination at common thresholds in many cases.
- Good fit: Buyers with stronger credit who want potentially lower long-term mortgage insurance costs and more flexibility on removing PMI.
Texas assistance options
Many McKinney buyers combine a primary mortgage with down payment help from statewide or local programs. Assistance can take the form of grants, forgivable seconds, deferred loans, or an annual tax credit.
TDHCA programs
- What it offers: Down payment and closing cost assistance paired with approved mortgages, plus access to a Mortgage Credit Certificate that can reduce federal income taxes.
- Typical rules: First-time buyer status as defined by the program, income and purchase price limits, owner-occupancy, and completion of homebuyer education.
TSAHC programs
- What it offers: Down payment assistance and competitive-rate loans for low to moderate-income buyers. Homes for Texas Heroes targets select occupations such as teachers, first responders, and health care workers.
- Typical rules: Income or occupation-based eligibility, primary residence use, and education requirements in some cases.
Local city and county options
- What to expect: Some cities and counties administer funds for first-time buyers or specific neighborhoods. Coverage, terms, and funding cycles vary.
- How to check: Reach out to the City of McKinney housing or community development office and Collin County community development to see what is active.
Mortgage Credit Certificate (MCC)
- What it is: A federal tax credit administered at the state or local level for eligible first-time buyers. It gives a percentage credit on mortgage interest paid each year.
- Why it helps: The credit can improve monthly affordability and, in some cases, help you qualify since some lenders factor the benefit into debt-to-income under their guidelines.
Nonprofit and employer support
- What to look for: Community nonprofits and some employers offer grants or forgivable second liens to reduce your required cash to close. Terms vary and may require counseling or employment verification.
Eligibility basics
Most low-down-payment loans and assistance share a few core rules. Always verify current criteria with an approved lender and the program administrator.
- First-time buyer definition: Often means you have not owned a primary residence in the last three years. Some programs allow exceptions.
- Income limits: Many Texas programs use Area Median Income for the Dallas–Fort Worth region, adjusted by household size and updated annually.
- Credit and DTI: FHA commonly works around 580 and above for 3.5 percent down. Conventional 3 percent programs often expect higher scores, and VA minimums are set by lenders. Debt-to-income thresholds vary by loan type and lender overlays.
- Property and occupancy: Most programs require a primary residence. Investment properties and second homes are typically not eligible. Condos and certain property types may have extra approvals.
- Education: Many assistance programs require a homebuyer education course, often online or through a HUD-approved counselor.
What it costs in dollars
In McKinney and Collin County, the percentage down matters because it translates into real dollars. Here are simple examples using a hypothetical $400,000 purchase price:
- 3 percent down conventional: $12,000 down payment.
- 3.5 percent down FHA: $14,000 down payment, plus an upfront mortgage insurance premium if financed into the loan.
You must also budget for closing costs and prepaid items, which often total about 2 to 5 percent of the purchase price. Assistance can cover some of this, depending on program rules. Many loan types allow gift funds toward your down payment and closing costs with proper documentation.
Choose the right path
Use these cues to narrow your options before you speak with a lender.
- Pick FHA if you have a modest credit profile and want 3.5 percent down with flexible guidelines. Consider the long-term cost of mortgage insurance.
- Pick Conventional 3 percent if your credit is stronger and you want a path to cancel PMI as you build equity. This can be cost-effective over time.
- Pick VA if you are eligible and plan to occupy the home as your primary residence. Zero down and no monthly PMI are key advantages.
- Add DPA or an MCC if you qualify under income, purchase price, or occupation rules. A forgivable or deferred second can reduce cash to close, while an MCC can improve net monthly affordability.
- Consider property type: FHA and VA have specific condo and property condition requirements. If you plan to buy a townhome or condo, ask early about eligibility.
Documents checklist
Gathering documents early speeds up pre-approval and program applications.
Identity and status
- Government photo ID.
- Social Security Number for all borrowers on the application.
- Proof of lawful residency or citizenship if required.
Income and employment
- Recent 30 days of pay stubs.
- W-2s for the last 2 years.
- Federal tax returns for the last 2 years if self-employed or requested.
- 1099s if applicable.
- Employer contact or Verification of Employment.
- Documentation of other income such as child support or alimony if used for qualification.
Assets and funds to close
- Last 1 to 2 months of bank statements for checking and savings.
- Statements for retirement accounts if using for reserves or down payment.
- Gift funds documentation, including a gift letter and donor statements. The letter should state the funds do not need to be repaid.
- Earnest money receipt and purchase contract once under contract.
Credit, debts, and legal
- List of monthly debts and minimum payments.
- Bankruptcy discharge papers and explanation if applicable.
- Divorce decree noting obligations or income received.
- Proof of resolved judgments or liens if applicable.
Property and program-specific
- Fully executed purchase contract when available.
- Seller disclosures and MLS listing details.
- Condo documentation if applicable, including HOA contact and resale certificates.
- Homebuyer education certificate for programs that require it.
- For VA loans: Certificate of Eligibility and DD214 or service proof. Lenders can often retrieve the COE with your permission.
- For MCC: Prior tax returns and program application forms as instructed.
Administrative
- Signed IRS Form 4506-T for tax transcript verification.
- Any program-specific applications your lender provides.
Pro tips
- Keep your funds traceable. Avoid cash deposits without documentation.
- Maintain steady employment and do not open new debt between pre-approval and closing.
- Start your homebuyer education early if you plan to use assistance that requires it.
Smart next steps
- Talk with an approved mortgage lender who works with FHA, VA, and 3 percent-down conventional loans and who understands Texas assistance. Lender overlays and pricing vary.
- Check active opportunities through TDHCA, TSAHC, the City of McKinney, and Collin County to confirm current income limits, purchase price caps, and terms.
- Complete a homebuyer education course if you plan to use a program that requires it.
- Compare scenarios. Look at payment and cash to close with FHA vs. conventional 3 percent vs. VA, and then add assistance or an MCC if eligible.
- Get pre-approved, then tour homes that fit your budget. In McKinney, this might include single-family homes or townhomes across neighborhoods near SH 121, US 75, and west toward Frisco and Prosper.
Ready to map the best path for your budget and timeline in McKinney? Reach out for local guidance and fast coordination with trusted lenders. Connect with Harman Cheema to start your DFW home search today.
FAQs
How low can my down payment be in McKinney?
- With VA, eligible borrowers can put 0 percent down. FHA is commonly 3.5 percent for qualifying credit, and conventional programs can go as low as 3 percent for eligible buyers.
What is the difference between FHA MIP, VA fees, and PMI?
- FHA uses an upfront and annual mortgage insurance premium, VA has a one-time funding fee and no monthly PMI, and conventional loans use PMI that can be cancelled as you build equity.
Can I use gift funds for my down payment in Texas?
- Many loan programs allow gift funds, but you must document the source and provide a gift letter stating the funds do not need to be repaid.
How do TDHCA and TSAHC assistance work in Collin County?
- They partner with approved lenders to offer down payment help and, in some cases, MCC tax credits, subject to income, purchase price, occupancy, and education requirements.
Will using down payment assistance add a second lien?
- Many assistance options are structured as second liens that are forgivable, deferred, or repayable, and some may affect your monthly payment depending on terms.
Do I need a certain credit score for a VA loan?
- VA does not set a universal minimum score, but most lenders use their own standards, and many look for around the low-600s or higher.
Do I have to live in the home if I use assistance?
- Most assistance programs require the home to be your primary residence, and many include an occupancy period that must be met to keep benefits.
