Down Payment Assistance Programs You Should Know About
For many aspiring homeowners, the biggest hurdle isn’t affording monthly mortgage payments—it’s saving enough money for a down payment and closing costs. Even though you don’t always need 20% down to buy a home, coming up with several thousand dollars upfront can feel overwhelming, especially for first-time buyers.
That’s where Down Payment Assistance (DPA) programs come in. These programs—offered by federal, state, and local agencies—can provide grants, low-interest loans, or even forgivable loans to help cover your upfront costs. If you’ve been putting off homeownership because of savings, these programs could make buying your first home possible much sooner than you think.
Here’s a guide to the most common types of assistance, how they work, and how to find out if you qualify.
What Are Down Payment Assistance Programs?
Down payment assistance programs are designed to help qualified buyers cover some or all of their:
- Down payment (typically 3–20% of the purchase price)
- Closing costs (usually 2–5% of the purchase price)
They’re usually aimed at:
- First-time homebuyers (though “first-time” often means you haven’t owned a home in the past 3 years)
- Low- to moderate-income buyers
- Buyers purchasing a primary residence (not a vacation home or investment property)
Depending on where you live, DPA could mean thousands of dollars in assistance—and in some cases, it doesn’t have to be repaid.
Types of Down Payment Assistance
Not all programs work the same way. The main categories include:
1. Grants
- Free money that does not need to be repaid.
- Often offered by state housing finance agencies or nonprofits.
- Example: A $5,000 grant applied directly to your down payment.
2. Forgivable Loans
- Structured as a second mortgage with no payments required.
- After a set number of years (commonly 5–10), the loan is forgiven if you’ve stayed in the home.
- If you sell or refinance early, you may have to repay some or all of it.
3. Deferred Loans
- A loan with no payments due until you sell, refinance, or pay off your primary mortgage.
- Acts as a safety net—helpful if you don’t have savings but expect higher income later.
4. Low-Interest Loans
- An additional loan to cover down payment or closing costs.
- Paid back monthly, but at a lower interest rate than your main mortgage.
National Down Payment Assistance Programs
In addition to state and local programs, a few national options are worth knowing about:
- FHA Loans
- Require as little as 3.5% down.
- Many state and local DPA programs pair with FHA loans.
- VA Loans
- Available to eligible veterans, active-duty service members, and some surviving spouses.
- Require 0% down and no private mortgage insurance (PMI).
- USDA Loans
- Designed for buyers in eligible rural and suburban areas.
- Require 0% down and have lower mortgage insurance costs.
While FHA, VA, and USDA aren’t technically DPA programs, they reduce or eliminate the need for large down payments.
State and Local Assistance Programs
Most down payment assistance comes from state housing finance agencies (HFAs), city governments, or nonprofit organizations. Examples include:
- North Carolina Home Advantage Mortgage® – Up to 3% of the loan amount as down payment help.
- California’s CalHFA MyHome Assistance Program – Deferred-payment junior loans up to $15,000.
- Texas State Affordable Housing Corporation (TSAHC) – Grants or forgivable second liens for qualifying buyers.
Nearly every state has at least one program, and many cities and counties offer local versions too.
Who Qualifies for Down Payment Assistance?
Each program has its own rules, but common eligibility factors include:
- First-time buyer status (or no homeownership in the past 3 years).
- Income limits (usually capped at 80–120% of the area’s median income).
- Credit score requirements (often 620 or higher).
- Property location (some programs are only for designated neighborhoods or rural areas).
- Home purchase price limits.
Tip: Even if your income seems too high, check local programs—you might still qualify based on other factors.
How to Apply for Assistance
Applying usually involves these steps:
- Research programs in your state or city. Start with your state’s housing finance agency website.
- Work with an approved lender. Most programs require you to go through specific participating lenders.
- Complete a homebuyer education course. Many programs ask first-time buyers to take a short class (online or in person) on budgeting and the buying process.
- Submit your application with income documents, credit history, and home purchase details.
Pros and Cons of Using DPA
Like any financial tool, down payment assistance has advantages and trade-offs.
Pros:
- Makes homeownership accessible sooner.
- Reduces upfront costs significantly.
- Helps keep savings intact for emergencies.
Cons:
- Some programs require you to stay in the home for several years or repay assistance if you sell early.
- May come with slightly higher interest rates.
- Adds paperwork and can lengthen the closing process.
Tips for Maximizing Your Chances
- Start early. Many programs run out of funds mid-year.
- Combine programs. Some buyers qualify for both state aid and local city programs.
- Be flexible. You may need to consider certain loan types or neighborhoods to qualify.
- Talk to a local lender. They’ll know which programs are active in your area.
Final Thoughts
Saving for a down payment is often the toughest part of buying a home—but you don’t have to do it alone. With the help of down payment assistance programs, you could receive thousands of dollars toward your purchase, making homeownership more realistic than you may have imagined.
Whether it’s a grant, forgivable loan, or state-sponsored program, the key is knowing your options and applying early. Don’t let the down payment stop you from taking the leap into homeownership.
Next step: Contact your local housing finance agency or a participating lender to explore the programs available in your area. Your future home may be closer than you think.