What it does
repayment
Down Payment Assistance Programs
You May Need Less Money to Buy a Home Than You Think
Saving for a down payment is one of the biggest obstacles many homebuyers face.
But you may not have to cover the entire down payment and closing costs on your own.
Down payment assistance programs can help eligible homebuyers reduce the amount of cash needed to purchase a home.
- Some down payment assistance plans cover your total down payment
- Some programs can cover your closing costs
- There are also programs that can cover other, less obvious, home buying expenses
Assistance may be available through state or local housing agencies, nonprofit organizations, housing authorities, employers, or other approved program providers.
What Is Down Payment Assistance?
Down payment assistance, often called DPA, refers to programs designed to help eligible homebuyers cover some or all of the upfront cash required to purchase a home.
Depending on the program, assistance may be structured as:
-
A grant
-
A forgivable loan
-
A deferred-payment loan
-
A low-interest second mortgage
-
A repayable second mortgage
-
Another form of approved subordinate financing
The assistance is generally used together with a primary mortgage.
Down Payment Assistance May Help With
-
Down payment
-
Closing costs
-
Both
-
Other eligible purchase expenses
A Simple Example
Home Purchase Price – $450,000
Required Down Payment – $13,500
Available Down Payment Assistance– $10,000
Estimated Remaining Down Payment – $3,500
This is a simplified example. Actual assistance amounts, program availability, qualification requirements, and eligible uses vary by program.
How Do Down Payment Assistance Programs Work?
Every assistance program is different, but the process generally looks like this:
Down payment assistance programs vary based on factors such as:
- Where you’re buying
- Your household income
- Purchase price
- First-time homebuyer status
- Loan type
- Property type
- Occupancy
- Household size
- Available program funding
Each program has its own qualification requirements.
Some programs may have income limits.
Others may require you to be a first-time homebuyer.
Some may require homebuyer education.
Others may be available to repeat buyers
If you qualify, the assistance is generally used alongside an eligible primary mortgage.
Depending on the program, that could potentially include:
- Conventional financing
- FHA financing
- VA financing
- USDA financing
- Housing finance agency mortgage programs
Not every assistance program works with every loan type.
Approved funds are generally applied toward eligible costs at closing.
Depending on the program, this may include:
- Down payment
- Closing costs
- Prepaid expenses
- Other approved homebuying costs
Some assistance programs have no repayment requirement.
Others may need to be repaid when you:
- Sell the home
- Refinance
- Pay off your mortgage
- Stop using the property as your primary residence
- Reach the end of a specified period
The details matter. Not every assistance program works with every loan type. Understanding your terms before re-selling your home is also extremely important.
What Types of Down Payment Assistance Are Available?
Not all down payment assistance works the same way.
Before choosing a program, it’s important to understand exactly what kind of assistance you’re receiving.
Grants
A grant generally provides eligible homebuyers with funds that do not have to be repaid if the program’s requirements are satisfied.
This is often what buyers mean when they search for: “Free money for a down payment.”
However, true grants aren’t the only type of down payment assistance available.
Forgivable Loan
A forgivable loan may begin as a second mortgage or subordinate lien.
Instead of making regular payments, some or all of the balance may be forgiven after you meet certain requirements.
- For example, a program might require you to:
- Own the home for a certain number of years
- Continue using it as your primary residence
- Avoid selling or refinancing during the forgiveness period
Deferred-Payment Loan
A deferred-payment program may provide assistance through a second loan without requiring regular monthly payments. Instead, repayment may be deferred until an event such as:
- Selling the home
- Refinancing
- Paying off the first mortgage
- Moving out of the property
This can reduce the amount of cash required upfront without necessarily increasing your immediate monthly housing payment.
Repayable Second Mortgage
Some down payment assistance programs are structured as second mortgages that require repayment. These may have:
- A fixed interest rate
- A low interest rate
- Monthly payments
- A defined repayment period
The benefit is still that the program may allow you to purchase sooner without having to save the entire upfront amount yourself.
The amount of assistance isn't the only thing to compare.
Repayment terms, interest, monthly payments, first-mortgage pricing, and refinance restrictions can make two programs with the same assistance amount very different financially.
Who Qualifies for Down Payment Assistance?
Every program is different, but qualification commonly depends on several factors.
Income Requirements
Some programs are specifically designed for low- or moderate-income households, while others have higher income thresholds.
Those limits may vary based on:
- Location
- Household size
- Program
- Mortgage type
Where You're Buying
Many programs are geographically specific.
Assistance may be offered at the:
- State level
- County level
- City level
- Regional level
The Purchase Price
Some programs establish a maximum home purchase price.
The limit may vary by county, city, or housing market.
How Much Down Payment Assistance Can You Get?
There isn’t one universal amount.
Down payment assistance can vary significantly between programs.
The amount you may actually qualify for depends on the programs available where you’re buying and your individual financial situation.
Some programs provide:
- A fixed dollar amount
- A percentage of the purchase price
- A percentage of the first mortgage
- Assistance up to a specified maximum
Down Payment Assistance (DPA) Example
Purchase Price – $500,000
Hypothetical Assistance Amount – 3%
Potential Assistance – $15,000
Another program might provide:
$10,000
$15,000
$25,000
Another fixed amount
A percentage-based benefit
Down Payment Assistance vs. Other Ways to Reduce Cash to Close
These options aren’t necessarily mutually exclusive. The important part is making sure each funding source complies with the requirements of the mortgage and assistance program.
DPA Program
Gift Funds
Seller Credits
100% Financing
Mortgage brokers
Provides eligible purchase funds
Funds from an eligible donor
Seller contributes to closing costs
May eliminate down payment
Bank/Lender
Depends on program
Generally no repayment
No repayment
Full amount financed
What Down Payment Assistance Programs Are Available?
There are many homebuyer assistance programs offered through government agencies, housing authorities, nonprofits, and other approved providers.
Available programs vary based on where you’re purchasing.
State Housing Finance Agency Programs
Many states operate housing finance agencies that provide mortgage programs and/or assistance for eligible homebuyers.
These programs may offer:
- Down payment assistance
- Closing cost assistance
- First-time homebuyer programs
- Preferred mortgage options
County Down Payment Assistance Programs
Individual counties may provide homebuyer assistance for properties purchased within eligible areas.
Program availability can depend on:
- Funding
- Income limits
- Purchase price
- Buyer status
- Property location
City Homebuyer Assistance Programs
Cities may also operate their own down payment or closing-cost assistance programs.
These programs can sometimes be highly localized.
A buyer could potentially qualify for assistance because a property lies within one city boundary while a similar property nearby does not.
Housing Authority and Nonprofit Programs
Housing organizations and nonprofits may offer homeownership assistance to eligible buyers.
Programs may target:
- First-time buyers
- Lower-income households
- Moderate-income households
- Specific neighborhoods
- Community revitalization
- Workforce housing
Employer or Profession-Based Assistance
Some employers, institutions, or special initiatives may provide housing assistance to eligible employees or professionals.
Availability varies significantly.
Available programs vary based on what you’re purchasing, and where you’re purchasing.
Benefits of Down Payment Assistance Programs
For some buyers, down payment assistance can help bridge the gap between being financially capable of owning a home and having enough cash saved to complete the purchase.
- Reduce the cash needed upfront
- Preserve more personal savings
- Potentially buy sooner
- Receive closing-cost help
- Maintain an emergency fund after closing
- Access programs designed for first-time buyers
- Combine assistance with eligible low-down-payment financing
Drawbacks of Down Payment Assistance Programs
That’s why we look at the complete financing package, not simply the assistance amount.
A $15,000 assistance program isn’t automatically better than another mortgage just because it provides $15,000 upfront.
- Income restrictions
- Purchase-price limits
- Geographic restrictions
- Homebuyer education requirements
- Primary-residence requirements
- Additional paperwork
- Second liens against the property
- Repayment requirements
- Restrictions on selling or refinancing
- Higher mortgage pricing with certain program structures
- Limited availability when program funds run out
Is Down Payment Assistance Worth It?
For the right buyer, it can be extremely valuable. The right answer depends on the numbers.
DPA May Be Worth Considering If:
- Your income supports a mortgage payment
- You have good enough credit to qualify
- The main obstacle is upfront cash
- You want to preserve some savings
- You’re eligible for a favorable assistance program
- You understand any repayment requirements
- You plan to remain in the home long enough for the program to make sense
DPA May Be Less Attractive If:
- The assistance significantly increases your interest rate
- You already have enough cash to comfortably purchase
- The program has unfavorable repayment terms
- You expect to sell or refinance soon
- You’re close to exceeding income or purchase-price limits
- Another mortgage option provides a better overall financial outcome
Frequently Asked Questions
Down payment assistance refers to programs that provide eligible homebuyers with funds that can help cover down payment, closing costs, or other approved purchase expenses.
Assistance may be offered as grants, forgivable loans, deferred loans, or repayable second mortgages.
Programs are commonly available through state housing finance agencies, counties, cities, housing authorities, nonprofit organizations, and other approved providers.
Availability depends heavily on where you’re purchasing and your financial situation.
Not always.
Some programs require first-time homebuyer status, while others are available to repeat buyers.
Eligibility depends on the individual program.
Some programs provide grants that don’t need to be repaid.
Others provide loans that may be forgivable, deferred, or repayable.
Always review the specific program terms before assuming the assistance is free.
Potentially, yes.
Certain approved assistance programs can be combined with FHA financing when applicable program requirements are met.
Potentially.
However, a refinance can sometimes trigger repayment of assistance or require the assistance provider to approve or subordinate an existing lien.
Review the program’s terms before refinancing.
Many programs have income limits.
Limits can vary based on location, household size, area median income, or other program criteria.
Not every program uses the same income threshold.
See What Down Payment Assistance Programs You May Qualify For
We’ll help you compare the options so you understand both what can help you buy the home and what that assistance will cost over time:
- Available down payment assistance programs
- First-time homebuyer programs
- Potential assistance amounts
- Income and purchase-price requirements
- FHA and conventional financing options
- Closing cost assistance
- Your estimated cash needed at closing
- Monthly mortgage payment
- Repayment or forgiveness requirements
Get Pre-Approved or Schedule a Mortgage Consultation
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The Wright Guidance Inc.
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