Homes For Texas Heroes
How we helped a teacher buy a home for a quarter of her old rent
Sound too good to be true? Well, prepare to be inspired!
Let me tell you Karmen's story.
Karmen* was a teacher who came to us looking to rent a home in Katy ISD after getting an employment offer from the district. She wanted to be close to the school she would be working at. Unfortunately, there isn't a lot of inexpensive housing in the area she wanted to be in.
Karmen had a big dog named Oscar, so apartments were out. She needed a house with room for Oscar to roam. "How much do you want to pay?" I asked her. "$900 a month would be amazing," she replied.
If you've looked into renting a home in Katy in the last few years, you know this is a nearly impossible ask. If you haven't, finding a house to rent in Katy for $900 would be like finding Brad Pitt roaming the halls of Katy Mills Mall. Possible in some kind of perfect storm, but not very probable.
As a teacher, Karmen had about $3,000 at her disposal to pay for the first month's rent, a security deposit, and an additional pet deposit for Oscar.
"I know you want to pay $900," I said, "but what's the most you could pay and not be struggling?"
"$1,500 per month," she told me, "but I wouldn't be able to have much fun. But maybe I could get a roommate."
"Are you willing to get a roommate? Because if so, that changes things."
Karmen was a teacher, 25, and single. "For sure. I'm all about lowering my expenses."
We hooked Karmen up with a loan originator who pre-qualified her for a $200,000 loan through the Homes for Heroes program.
Her out of pocket cash would include earnest money, an inspection, and the appraisal. It was going to be the equivalent to what she would have had to pay to get into a rental. The Heroes program would cover her down payment and we would help her find an amazing deal in a great location, and help advise on and craft an offer in which the seller would cover her closing costs.
Karmen put her trust in us, and we delivered. We found her a 3-bedroom, 2-bathroom, renovated home within 5 minutes of her new school. It was in a safe area, the older home had been updated to be worthy of a Pinterest board, and it even had some amazing neighborhood amenities for both her and Oscar to use.
The home was originally listed at $193,000. Our accepted offer was for $184,000, with the Seller covering $5,000 in closing costs. Once inspections were done, we moved onto the appraisal and the home under-appraised. It was a shock - even to us. The appraiser came in with a value of $175,000. While it was an unfortunate occurrence for the seller, it would likely become a future equity windfall for Karmen.
We not only negotiated the sales price down to the appraisal value, but we also managed to get the seller to agree to still cover $3,000 of Karmen's closing costs. Homes for Heroes covered her down payment, and contributed the missing closing concessions to Karmen's loan.
This teacher and first-time homebuyer's final monthly payment when it all was said and done would be $1,452 - this is less than her original budget of $1,500 and several hundred dollars under what she could have paid in rent for the same home in the same location.
I told Karmen, "remember when you told me in a perfect world, you'd find something for $900 a month? You should pay that toward the mortgage each month. On top whatever your roommate is paying, even if it's more than the mortgage. You'll pay off the house a lot faster."
With such an amazing location, it was no problem for Karmen to find a roommate. And then another. Her tenants were paid $600 a month each, plus an equal share of the utilities. Yes, you're reading that right. Karmen's two roommates are paying $1,200 of her $1,452 per month in rent. Karmen is effectively paying $252 a month for a home that she owns. OWNS!
A few weeks later we went out for BBQ and I did the math for her. If she paid $2,100 per month (her $900 "perfect payment" and the $1,200 from her roommates) on her mortgage each month even though it was well over the required payment, she'd own the home outright in 11 years. 11. Years.
"Then you can rent it out completely and go buy another one and settle down or do it again," I said. "Once it's paid off, that house should generate $1,000 in net income each month. That will certainly be a nice add-on to your retirement check when the time comes."
So how much did our representation cost Karmen?
Nothing. Zero. Zilch.
Our representation fee was paid for by the seller. (Yep!)
In Texas, a typical sales transaction looks like this:
- the seller pays their listing agent a set commission percentage
- the listing agent splits their commission with the buyer's agent
- it takes both agents to get the sale done
There's a common misconception that if you go into a potential sale without representation, it will save the seller money. However, the seller typically has already agreed to pay the listing agent a certain percentage. If you go in without representation, the listing agent still gets that commission in most cases - they simply don't have to split it.
Additionally, a listing agent cannot represent both sides of a transaction in Texas. If you come into the transaction without an agent, you'll be assigned to an intermediary agent anyway (who is usually being paid less than your Buyer's agent would have been) who may or may not have the skills and qualifications to get you the best deal.
Buyer representation is vital to the homebuying process. You need a full-time agent who's not afraid to negotiate on your behalf, who knows how to maneuver the programs and sellers, and who will work their tails off to get you the best deal possible.
How does this program work?
The Heroes program provides down-payment assistance to people in what they consider to be "hero" employment positions. These positions include teachers and paraprofessionals, as well as school librarians, counselors, and nurses (it also includes police officers, EMTs, fire-fighters or anyone else that is labeled as a "first responder").
They have two separate programs.
The first is where the down-payment assistance is provided in the form of a grant. That means you don't have to pay it back. (Seriously.) They will cover up to 5% of the sales price. Your interest rate will vary based on a mix of factors, including the current market rates, how much of a grant you're receiving, and your credit score.
Grant money does not need to be paid back.
In the second program, the down payment assistance is provided in the form of a second lien (which is just a fancy word for secondary loan) on the home. These are forgivable liens. This means that if you stay in the house long enough, they will be forgiven (and you won't owe the money for them anymore after a period of time as if they never existed). Depending on the program you choose, the second liens can be forgiven in 3 to 10 years, with prorations if you need to sell earlier. If you sell before that time, you'll have to pay that second lien back, just as you would a regular mortgage.
How can you get started? The 5 requirements for this program are below.
You need to be in an eligible job role in the greater Houston area
These roles include teachers and paraprofessionals, as well as school librarians, counselors, and nurses (it also includes police officers, EMTs, fire-fighters or anyone else that is labeled as a "first responder").
Our services to help you get qualified for this program are limited to the greater Houston area and includes Houston, Katy, Cypress, Richmond, Brookshire, Fulshear, Sugar Land, and the surrounding areas.
You'll need about $3,000-$4,000 in savings you can invest into a home
While the program will cover your down-payment and closing costs (if needed), you'll still need a small amount of cash on hand to perform some standard duties and tasks once you put a home under contract.
That $3,000 will be used to pay your earnest money deposit once you go under contract to buy a home (typically 1% of the sales price), your inspection ($400 is the average cost), your appraisal fee ($600 is the average) and a survey, if needed ($400 is the average survey fee). (Note these are the averages for a home in the $200K range.)
Getting pre-approval to ensure you qualify for this program is FREE. The program will cover your down-payment costs. And can even help cover closing costs in the event that we cannot get the seller to do it instead (which we usually can!).
A credit score of 620 or above.
For this program, we can work with credit scores of 620 or above in reality, but the higher your credit score is, the better your interest rate on the loan. 640 or above will get you the best rates.
Have a credit score below 620? Get in touch with us. We can help you create a plan to raise your credit score to get it into an eligible range. Have a credit score above 620, but below 640? Let us know. We can offer suggestions on improving it to get you into the 640s to obtain a better interest rate while we start your search for the perfect home.
If you're looking to househack, you'll need a willingness to have a roommate (or two)
Househacking is where you use the rental payments of roommates or tenants to cover or severely reduce your portion of the mortgage on your home.
That said, you don't need to househack if you don't want to.
As long as you're comfortable covering the mortgage payments with only your salary if you're single, or you and your spouse's or partner's salaries - which should be your goal whether you plan to take roommates or not, just in case - you can become a homeowner using this program.
But if you're you're willing to share your space, it can help cover a portion of your payments, and help you pay off the home sooner.
And an amazing real estate team (hint - that's us!)
Why us? Because we are experienced. We are dedicated.
And we will always put your best interests above everything else.
- We hook you up with recommendations for trusted professionals to help you with every aspect of your home purchase.
- We give you the full picture when helping you compare homes - showing you your monthly payments when also including tax rates, HOA dues when applicable, and hazard insurance rates.
- If we think you'd be stretching yourself too thin, we'll tell you.
- We'll negotiate hard on your behalf to get you the best price on a home.
- We can sometimes find deals other agents don't have access to on the MLS via our network of investors.
- We can advise you of the market-value rent you might be able to obtain if you were to attempt to find a roommate.
- We'll be there for you as a resource, even after closing to help ensure you obtain applicable tax exemptions, answer questions, and be a continued source of support.
Look - everyone knows a Realtor, but when it comes to the biggest financial decision you'll likely make in the next few years, you want a seasoned professional by your side who has experience with this program and has built the arsenal of contacts we have.
In Karmen's words...
"Being a first-time buyer, I was clueless and terrified of the unknown. I would forever be homeless if it weren't for Rae! Every step of the way she texted, called, and FaceTimed me through the entire process. She went above and WAY beyond for me and I couldn't be more grateful for her! Not just with finding a house and working her magic, but she has given me so much advice, shown me around town, and introduced me to new people. She has given me contacts for all of this homeowning nonsense and taught me so much about a world I didn't know existed! Thank you Rae!"
*Karmen's name was changed to protect her financial privacy.
Ready to get started?
Need a recommendation for a loan originator who works with this program? You can start the application process using one of our trusted lenders by clicking on one of the links below.
Get pre-qualified at no cost below. (Yes! Pre-qualification is free.)