Get Started

The down payment is often the biggest hurdle to buying a home. But that doesn’t have to be the case. A range of homebuying assistance programs can help cover the upfront costs.

In the United States, there are more than 2,500 DPA programs. While some federal programs exist, they are far outnumbered by state and local sources. Funding typically comes from city and county governments, state agencies, non-profit organizations, and private groups.

Geared toward first-time buyers and low- to moderate-income households, DPAs help make homeownership more affordable for borrowers who can manage monthly mortgage payments but lack the cash reserves for the initial costs — which are often in the tens of thousands of dollars.

It’s a common misconception that getting help with a down payment replaces the need to qualify for a primary mortgage. Borrowers must meet all standard mortgage approval requirements while simultaneously applying for the assistance.

It typically works like this: your primary mortgage covers most of the purchase price; the DPA covers the down payment, and usually the closing costs, with a grant or a second loan.

As an example, an FHA loan requires a minimum 3.5% down payment. An FHA down payment assistance program could feasibly cover that full amount, allowing you to buy a home with almost no money out of pocket at closing

Most DPAs are intended for first-time homebuyers. That definition, however, is broader than you may think. It can apply to:

• Former Homeowners: Under U.S. Department of Housing & Urban Development (HUD) guidelines, anyone who hasn’t owned a primary residence in the past 3 years qualifies as a first-time buyer.
• Establishing a New Household: Single parents or separated spouses who co-owned a home with a former partner.
• Mobile or Manufactured Homes: Anyone whose previous primary residence was not permanently fixed to a foundation.

More than a third of all DPA programs are open to repeat buyers who meet income and credit criteria.

• Credit Score: A score of 620 or above is common, though some programs allow lower credit scores.
• Income Limit: You typically need to earn below or slightly above your area’s median income as calculated by HUD.
• Primary Residence: You must live at the home; investment and rental properties usually don’t qualify.
• Purchase Price: Many programs set a maximum home price.
• Education: Some programs require a HUD-approved homebuyer education course.
• Contribution: Some programs require the homebuyer to put some of their own funds toward closing costs.
• Property Eligibility: These are generally broad and include single-family homes, condos, townhomes, and, in some cases, multi-family properties.

A significant number of DPAs offer assistance to specific professions, including teachers, first responders, and public servants.

Home loan assistance programs have a wide range of structures. They generally fall into these categories:

• Grants: These are the simplest form of DPA. Gift funds you don’t need to repay apply toward your down payment and, depending on the program, closing costs.
• Forgivable Second Mortgages: Known as “soft seconds,” these are zero-interest loans forgiven after a set period, typically 3 to 10 years. Moving, selling, or *refinancing early usually triggers a repayment requirement.
• Deferred-Payment Loans: These are zero-interest loans in which the debt doesn’t disappear, but gets deferred until you sell, refinance, or the mortgage loan term ends.
• Low-Interest Second Mortgages: These are second mortgage loans with below-market interest rates that you pay alongside your first mortgage, making two payments each month.
• Individual Development Accounts (IDAs): Known as “matched savings programs,” these allow you to build up a down payment with an account in which you and a sponsoring institution contribute matching funds.

The Upsides:

• Accelerated Ownership: It often takes homebuyers years to save for a down payment; DPAs can significantly shorten that timeline.
• Preserved Savings: You can use personal cash for other home expenses such as moving costs, repairs, and maintenance.
• Earlier Equity: You may begin building home equity and benefiting from property appreciation sooner.
• Stacked Assistance: Many DPA programs can be combined with other sources, such as seller concessions or additional grants, lowering your out-of-pocket costs.

The Downsides:

• Strict Criteria: To qualify, you often need to meet income caps, location requirements, and adhere to property-type rules.
• Added Monthly Cost: Second-mortgage programs increase total housing expenses with an extra monthly payment.
• Loan Terms: Some DPA-paired first mortgages carry higher interest rates or may charge processing fees.
• Residency Commitment: Many DPAs, including forgivable loans, require you to stay in the home for a set period or pay off the balance if you choose to leave.
• Lower Equity: With loan DPAs, you have lower initial equity than with a cash down payment.\
• Shortfalls: Your DPA may not cover the entire down payment or full closing costs.

As most down payment and closing cost assistance programs are local, DPAs vary according to market. The most reliable places to research funding include:

• State Housing Finance Agencies (HFAs): State-level HFAs list active programs on their official websites.
• Local Municipalities: City and county housing department websites list programs for specific local areas.
• HUD: The federal government maintains a list of approved housing counseling agencies by state that can help you identify programs.
• Internet Resources: The real estate platform DownPaymentResource.com has a searchable database of more than 2,500 DPA programs.

*Refinancing Disclaimer: When it comes to refinancing your home loan, you can generally reduce your monthly payment amount. However, your total finance charges may be greater over the life of your loan.