Down Payment Assistance - Free Funds for Your Home Purchase

Down payment assistance (DPA) programs provide grants, forgivable loans or low-interest loans to help home buyers cover their down payment and closing costs. Over 2,000 programs exist nationwide, offering $5,000 to $50,000+ in assistance. Most require income limits (80-150% of area median income) and completion of homebuyer education. Many aren’t limited to first-time buyers despite common misconceptions.

Types of Down Payment Assistance

Grants

What it is: Free money that never needs to be repaid

Amount: Typically $5,000-$25,000 or a percentage of purchase price

Best for: All eligible buyers—no repayment obligation

Availability: Most competitive, limited funding

Jennifer Martinez received a $15,000 grant from her state housing agency. She used it for her 3% down payment on a $280,000 home and had money left for closing costs.

Forgivable Loans (Second Mortgages)

What it is: A loan that’s forgiven after you live in the home for a set period

Typical terms: Forgiven after 5-10 years of owner occupancy

Amount: $10,000-$40,000 common

Catch: If you sell or refinance before forgiveness period ends, you repay a portion

Example:

$20,000 forgivable loan
Forgiven 20% per year over 5 years
Sell after 3 years: Repay $8,000 (40%)
Stay 5+ years: Owe nothing

Deferred Payment Loans

What it is: Loan with no monthly payments, due when you sell, refinance or pay off mortgage

Interest: May be 0% or low interest

Amount: Varies by program

Best for: Buyers who plan to stay long-term

Low-Interest Loans

What it is: Second mortgage at below-market interest rate

Terms: Monthly payments required, but much lower than market

Amount: $10,000-$50,000+

Best for: Buyers who want to start building equity in the second mortgage

Who Qualifies for Down Payment Assistance?

Income Limits

Most programs cap household income at 80-150% of Area Median Income (AMI).

Example income limits (varies by location):

AMI Percentage	2-Person Household	4-Person Household
80% AMI	$60,000-$85,000	$75,000-$105,000
100% AMI	$75,000-$105,000	$95,000-$130,000
120% AMI	$90,000-$125,000	$115,000-$155,000

High-cost areas have higher limits. Check your specific program.

First-Time Buyer Requirement

Many programs require “first-time buyer” status, but the definition is generous:

You’re considered first-time if:

You’ve never owned a home
You haven’t owned in the past 3 years
You’re a single parent who only owned with a former spouse
You’re a displaced homemaker

Some programs have no first-time requirement and are open to any buyer meeting income limits.

Property Requirements

Typical requirements:

Must be primary residence
Within program geographic area
Meet minimum property standards
Maximum purchase price limits

Property types usually allowed:

Single-family homes
Condos and townhouses
2-4 unit properties (if owner-occupied)
Manufactured homes (some programs)

Credit Score Requirements

Program Type	Typical Minimum Score
State HFA programs	620-660
City/county programs	580-640
Nonprofit programs	580-620
Employer programs	Varies

Homebuyer Education

Almost all DPA programs require homebuyer education:

Online courses (2-8 hours)
In-person workshops
HUD-approved counseling agency

Many courses are free or low-cost ($50-$100).

Where to Find Down Payment Assistance

State Housing Finance Agencies (HFAs)

Every state has an HFA offering DPA programs:

California: CalHFA
Texas: TDHCA
Florida: Florida Housing
New York: SONYMA
And 46 others

Search “[Your State] Housing Finance Agency” for your state’s programs.

City and County Programs

Local governments often have their own programs:

City of Atlanta Homeownership Program
Los Angeles Mortgage Assistance Program
Chicago Home Buyer Assistance
Many more

Check your city and county housing departments.

Employer Programs

Some employers offer homebuyer assistance:

Employer grants or loans
Matching down payment programs
Reduced rate partnerships with lenders

Ask your HR department about available programs.

Nonprofit Organizations

Housing nonprofits provide assistance in many areas:

Habitat for Humanity
NeighborWorks affiliates
Community Development Financial Institutions (CDFIs)
Local housing counseling agencies

Special Programs

Teacher/Educator programs: Good Neighbor Next Door, state teacher programs

Healthcare worker programs: Special programs for nurses, doctors and first responders

Military/Veteran programs: VA plus state veteran bonuses

First responder programs: Police, fire and EMT assistance

How Much Can You Get?

By Program Type

Source	Typical Amount
State HFA	$5,000-$25,000
City/county	$5,000-$40,000
Employer	$2,500-$10,000
Nonprofit	$3,000-$15,000
Special programs	$5,000-$50,000+

Stacking Programs

Many buyers combine multiple assistance sources:

Example stack:

State HFA grant: $10,000
City forgivable loan: $15,000
Employer match: $5,000
Total assistance: $30,000

Check whether programs allow stacking—some prohibit combining with other assistance.

How to Apply for Down Payment Assistance

Step 1: Research Available Programs

Start with:

Your state HFA website
HUD’s list of approved counseling agencies
DownPaymentResource.com (search by address)
Your lender (many know local programs)

Step 2: Check Eligibility

For each program, verify:

Income limits for your household size
First-time buyer requirements
Property location requirements
Credit score minimums
Purchase price limits

Step 3: Complete Homebuyer Education

Most programs require this before approval:

Find HUD-approved course at hud.gov
Complete online or in-person course
Receive certificate of completion

Step 4: Find a Participating Lender

Not all lenders work with all DPA programs. You need a lender who:

Is approved for the specific program
Knows the program requirements
Can layer DPA with your primary loan

Step 5: Apply for DPA with Your Mortgage

DPA application often happens alongside your mortgage application:

Provide required documentation
Meet program deadlines
Work with lender to coordinate funding

Step 6: Close on Your Home

At closing:

DPA funds are applied to down payment and/or closing costs
Any loan documents are signed
You get your keys!

Pros and Cons of Down Payment Assistance

Advantages

Lower cash needed: Buy sooner with less savings

Grants are free money: No repayment required

Forgivable loans become free: Stay long enough and owe nothing

Buy more house: Put your savings toward a better property

Keep emergency fund: Don’t drain savings for down payment

Disadvantages

Higher monthly payment: Less down = higher loan amount

May require PMI: Low down payment triggers mortgage insurance

Restrictions apply: Must meet program requirements

May affect competitiveness: Some sellers prefer buyers without assistance

Clawback provisions: Selling early may require repayment

Common Down Payment Assistance Myths

Myth: Only for First-Time Buyers

Reality: Many programs are open to repeat buyers who meet income limits. Even “first-time buyer” programs use a 3-year lookback—if you haven’t owned recently, you qualify.

Myth: Income Limits Are Very Low

Reality: Many programs allow incomes up to 120-150% of AMI. A family of four earning $120,000+ can qualify in many areas.

Myth: The Process Takes Forever

Reality: DPA adds minimal time to closing—usually just paperwork. Most closings happen in 30-45 days.

Myth: It’s Only for Low-Income Areas

Reality: Programs exist in expensive markets too, often with higher limits. High-cost areas like California, New York and Boston have substantial programs.

Myth: Assistance Means a Bad Loan

Reality: DPA works with standard FHA, VA and conventional loans. You get market-rate primary financing with assistance layered on top.

Real Examples

Example 1: State HFA Grant

Marcus in Ohio:

Income: $65,000
Purchase price: $220,000
Ohio Housing Finance Agency grant: $7,500
Used FHA loan with 3.5% down ($7,700 needed)
Grant covered almost entire down payment
Out of pocket at closing: ~$4,000 for remaining costs

Example 2: City Forgivable Loan

Angela in Denver:

Income: $85,000
Purchase price: $380,000
Metro Mortgage Assistance Plus: $20,000 forgivable second
Conventional 97 loan (3% down = $11,400)
Used $11,400 for down payment, $8,600 for closing costs
Loan forgiven after 5 years of occupancy

Example 3: Stacked Programs

Jennifer in California:

Income: $95,000
Purchase price: $450,000
CalHFA MyHome: $22,500 (5% deferred loan)
City of Sacramento grant: $10,000
Total assistance: $32,500
Combined with FHA loan
Bought in competitive market with minimal out-of-pocket

Frequently Asked Questions

Do I have to pay back down payment assistance?

Depends on the program. Grants never require repayment. Forgivable loans are forgiven after 5-10 years of occupancy. Deferred loans are due when you sell or refinance. Some programs require monthly payments.

Can I use down payment assistance with any lender?

No. You must use a lender approved by the specific DPA program. Ask lenders if they work with DPA before applying.

How long does it take to get approved?

DPA approval happens alongside your mortgage—usually 30-45 days total. Complete homebuyer education early to avoid delays.

Can I use assistance for closing costs?

Many programs allow funds for closing costs, not just down payment. Check specific program rules—some are down-payment-only.

Will down payment assistance affect my mortgage rate?

Generally no. Your primary loan rate is based on your credit and loan type. However, some lender-specific programs may have rate adjustments.

What if I sell before the forgiveness period ends?

You’ll repay a prorated amount based on how long you stayed. If you received $20,000 forgiven over 5 years and sell after 2 years, you’d repay about $12,000 (60%).

Find out how to access down payment assistance programs