Down Payment Assistance: Your Complete Guide
Discover grants, forgivable loans, and state programs that help you buy a home with less money upfront.
The down payment is the biggest barrier to homeownership in America today. According to the National Association of Home Builders, saving enough for a down payment takes the average renter more than eight years. But here is the good news: over 2,600 down payment assistance programs exist across the country, and most home buyers qualify for at least one.
Down payment assistance (DPA) programs provide money to help cover your down payment and closing costs. These programs come from state housing finance agencies, local governments, nonprofits, and employers. The assistance takes several forms, including outright grants you never repay, forgivable loans that disappear after a few years, and low-interest second mortgages with deferred payments.
Whether you are a first-time home buyer or a repeat purchaser, understanding your DPA options could save you thousands of dollars. This comprehensive guide explains every type of down payment assistance, eligibility requirements, how to apply, and how to combine DPA with mortgage programs like FHA loans, VA loans, and conventional loans.
In This Guide
What Is Down Payment Assistance?
Down payment assistance is financial help provided to home buyers to cover the initial cash required to purchase a home. Most mortgage lenders require a down payment ranging from 3% to 20% of the home's purchase price. For a $350,000 home, that means between $10,500 and $70,000 in cash upfront.
DPA programs exist because saving this amount is extremely difficult for many Americans. Rising home prices, student loan debt, and increasing living costs make it nearly impossible for many families to save enough. These programs address the affordability gap that keeps qualified borrowers from becoming homeowners.
The Department of Housing and Urban Development (HUD) supports down payment assistance through various federal programs. State housing finance agencies (HFAs) administer most DPA programs at the state level. Cities, counties, nonprofits, and even some employers also offer their own assistance.
Down Payment Resource, a national database, tracks more than 2,600 active DPA programs. Their research shows that 79% of homes listed for sale in the United States qualify for at least one DPA program based on location and price. Many home buyers leave thousands of dollars on the table simply because they do not know these programs exist.
Key Takeaway
DPA programs are not just for low-income buyers. Many programs serve moderate-income households earning up to 120% of the area median income. That means a family earning $100,000 or more may still qualify in many markets.
Types of Down Payment Assistance Programs
Not all DPA programs work the same way. Understanding each type helps you choose the best option for your financial situation. Here are the four main types of down payment assistance available to home buyers today.
Grants
Grants are free money that never needs to be repaid. They are the most desirable form of DPA. State housing finance agencies, local governments, and nonprofits commonly offer grants. Amounts typically range from $5,000 to $25,000 depending on the program and location.
Best for: Buyers who want maximum benefit with no strings attached.
Forgivable Loans
Forgivable loans are second mortgages that are forgiven after a set period. The forgiveness period is usually 5 to 15 years. If you remain in the home during that time, the loan balance drops to zero. If you sell or move before the period ends, you repay a prorated amount.
Best for: Buyers planning to stay in the home long term.
Deferred-Payment Loans
Deferred-payment loans require no monthly payments. You repay the loan when you sell the home, refinance, or move out. Many carry zero interest or very low interest rates. This structure keeps your monthly payment low while still providing the upfront cash you need to close.
Best for: Buyers who need lower monthly payments now.
Matched Savings (IDA)
Individual Development Accounts (IDAs) match your savings dollar-for-dollar or more. You deposit money into a special savings account over time. The program matches each dollar you save, often at a 2:1 or 3:1 ratio. These programs take longer but multiply your buying power significantly.
Best for: Buyers with time to save who want to maximize funds.
DPA Program Types Compared
| Feature | Grants | Forgivable Loans | Deferred Loans | Matched Savings |
|---|---|---|---|---|
| Repayment Required | No | Conditional | Yes, at sale | No |
| Typical Amount | $5K–$25K | $5K–$40K | $5K–$50K | $2K–$10K |
| Monthly Payment | None | None | None | Savings deposit |
| Time Commitment | None | 5–15 years | Until sale | 1–3 years |
| Availability | Common | Very Common | Common | Limited |
Who Qualifies for Down Payment Assistance?
Eligibility requirements vary widely between programs. However, most DPA programs share common qualification criteria. Understanding these requirements helps you narrow down which programs fit your situation before you apply.
Income Limits
Most DPA programs set income limits based on the area median income (AMI) for your county. Common thresholds include 80% AMI for lower-income programs and 120% AMI for moderate-income programs. In high-cost areas like San Francisco or New York, income limits can exceed $150,000 per year. Always check local limits because they vary significantly by geography.
First-Time Home Buyer Status
Many programs require first-time home buyer status. The federal definition considers anyone who has not owned a home in the past three years a first-time buyer. This means previous homeowners who rented for three or more years qualify again. Some programs do not require first-time buyer status at all, especially those targeting specific professions or locations.
Credit Score Requirements
Most DPA programs require a minimum credit score between 620 and 680. Some programs accept scores as low as 580 when paired with an FHA loan. A higher credit score typically qualifies you for larger assistance amounts and better terms. Check your credit report before applying and address any errors or outstanding issues.
Homebuyer Education
Nearly all DPA programs require completion of a HUD-approved homebuyer education course. These courses cover budgeting, mortgage basics, the home buying process, and avoiding predatory lending. Most courses take four to eight hours and are available online. The education requirement protects both the buyer and the program by ensuring informed decision-making.
Property Requirements
The home you purchase must typically meet specific standards. Most programs require the property to be your primary residence. Some set maximum purchase price limits based on local home values. The home must usually pass an inspection and meet minimum property standards required by the associated mortgage program.
Quick Eligibility Checklist
How Much Down Payment Do You Actually Need?
The 20% down payment myth keeps many potential buyers on the sidelines. In reality, most mortgage programs accept far less. Understanding how much you really need for a down payment is the first step toward homeownership.
When you combine low down payment mortgages with DPA programs, you can often purchase a home with little to no money out of pocket. For example, an FHA loan requiring 3.5% down on a $300,000 home means $10,500. A state DPA grant of $10,000 covers nearly all of it, leaving you with just $500 plus closing costs.
Some DPA programs also cover closing costs, which typically add 2% to 5% of the purchase price. This means the total upfront cash needed to buy a home could drop to near zero with the right combination of programs.
State and Local DPA Programs
Every state has a housing finance agency that administers down payment assistance programs. Many cities and counties offer additional local programs. The combination of state, local, and national programs means you may qualify for multiple sources of assistance simultaneously.
For a detailed breakdown of programs available in each state, see our complete state-by-state guide to down payment assistance programs.
How State Housing Finance Agencies Work
State HFAs operate as quasi-governmental organizations. They sell tax-exempt bonds to raise money for affordable housing programs. This funding supports below-market interest rate mortgages and down payment assistance. Each state HFA sets its own eligibility requirements, assistance amounts, and program structures.
National Programs Available in All States
Several national down payment assistance programs operate across all 50 states. These include programs from organizations like the National Homebuyers Fund, Chenoa Fund, and USDA rural housing programs. The Good Neighbor Next Door program from HUD offers 50% discounts on home prices for law enforcement officers, firefighters, EMTs, and teachers in revitalization areas.
Employer-Assisted Housing
Some employers offer down payment assistance as a workplace benefit. Major companies including Amazon, Google, and various hospitals and school districts provide housing assistance. Employer programs may offer grants, forgivable loans, or matched savings. Ask your human resources department about housing benefits your employer may provide.
Pro Tip
You can often stack multiple DPA programs together. A state HFA grant combined with a local city program could provide $20,000 or more in total assistance. A knowledgeable real estate agent or lender can help identify all programs you qualify for.
Combining DPA with Mortgage Programs
Down payment assistance works alongside most major mortgage programs. The key is finding the right combination that maximizes your benefits while keeping monthly payments affordable. Here is how DPA pairs with each major loan type.
DPA with FHA Loans
FHA loans require just 3.5% down with a credit score of 580 or higher. Many state DPA programs specifically design their assistance to pair with FHA financing. The FHA down payment can come entirely from a DPA grant or gift funds. This combination is popular among first-time buyers with lower credit scores.
DPA with Conventional Loans
Conventional loans require as little as 3% down through programs like HomeReady and Home Possible. Many DPA programs work with conventional financing. Putting less than 20% down means paying private mortgage insurance (PMI), but DPA can help you reach the 20% threshold and eliminate PMI entirely.
DPA with VA and USDA Loans
VA loans and USDA loans offer zero down payment options. While these borrowers do not need down payment help, DPA programs can cover closing costs instead. This means eligible veterans and rural buyers can potentially purchase with virtually no out-of-pocket expenses.
| Loan Type | Min Down | DPA Compatible | DPA Can Cover |
|---|---|---|---|
| FHA | 3.5% | Yes | Down payment + closing costs |
| Conventional | 3% | Yes | Down payment + closing costs |
| VA | 0% | Yes | Closing costs only |
| USDA | 0% | Yes | Closing costs only |
How to Apply for Down Payment Assistance
Applying for down payment assistance requires planning and preparation. Most programs take 30 to 60 days to process, so start early in your home buying journey. Follow these steps to maximize your chances of receiving assistance.
Research Available Programs
Start by identifying programs in your area. Visit your state HFA website, search the Down Payment Resource database, and contact local housing authorities. Many areas have five or more programs available simultaneously.
Get Pre-Approved for a Mortgage
Most DPA programs require mortgage pre-approval before you can apply. Work with a lender experienced in DPA programs. Not all lenders participate in every program, so choose one familiar with your target DPA options.
Complete Homebuyer Education
Enroll in a HUD-approved homebuyer education course. Many programs accept online courses from providers like Framework or eHome America. Keep your certificate of completion because you will need it for your application.
Gather Required Documents
Collect pay stubs, tax returns, bank statements, and identification. DPA programs verify your income, employment, and assets. Having documents ready speeds up the application process significantly.
Submit Your Application
Apply through your lender or directly with the DPA program administrator. Some programs accept applications year-round while others have specific application windows. Funding can be limited, so apply as early as possible.
Close on Your Home
Once approved, the DPA funds are applied at closing. The assistance typically arrives as a separate lien on the property. Your closing process includes both your primary mortgage and the DPA agreement.
Pros and Cons of Down Payment Assistance
Advantages
- Buy a home sooner than saving alone
- Grants never require repayment
- Preserve savings for emergencies and repairs
- Can cover both down payment and closing costs
- Multiple programs can be combined
Considerations
- May limit your home price range
- Residency requirements may restrict when you can sell
- Application process adds time to closing
- Some programs have limited funding each year
- Second lien may slightly increase interest rate
Common DPA Mistakes to Avoid
Many home buyers miss out on thousands of dollars in assistance due to avoidable mistakes. Understanding these common pitfalls helps you navigate the DPA process more successfully.
Not Researching All Available Programs
The biggest mistake is assuming you do not qualify. Many buyers never even look into DPA programs because they believe the money is only for low-income families. In reality, moderate-income households earning six figures may qualify in many areas. Research every program available in your state, county, and city before making assumptions.
Working with an Inexperienced Lender
Not all mortgage lenders participate in DPA programs. Some lenders are unfamiliar with the application process or do not offer certain program types. Choose a lender who has experience processing DPA applications. Ask how many DPA loans they have closed in the past year.
Waiting Too Long to Apply
Many DPA programs operate on a first-come, first-served basis with limited funding. Popular programs can exhaust their annual budget within months or even weeks of opening. Apply as early as possible and have backup programs identified in case your first choice runs out of funding.
Ignoring the Fine Print
Every DPA program has specific terms and conditions. Forgivable loans require you to stay in the home for a set period. Some programs restrict renting out the property. Others require you to maintain homeowner's insurance at specific levels. Read every document carefully before signing.
Making Large Financial Changes Before Closing
Opening new credit accounts, changing jobs, or making large purchases before closing can disqualify you from both your mortgage and DPA. Keep your financial profile stable from application through closing day. Avoid any action that changes your income, debt, or credit profile.
Explore Related Guides
Frequently Asked Questions
What is down payment assistance?
Down payment assistance refers to programs that help home buyers cover the upfront costs of purchasing a home. These programs offer grants, forgivable loans, deferred-payment loans, or matched savings plans. They are funded by state housing finance agencies, local governments, nonprofits, and employers.
Who qualifies for down payment assistance programs?
Eligibility varies by program but commonly includes income limits, first-time home buyer status, minimum credit score requirements of 620 to 680, and completion of a homebuyer education course. Many programs also require the home to be a primary residence.
Do you have to pay back down payment assistance?
It depends on the program type. Grants do not need repayment. Forgivable loans are forgiven after 5 to 15 years if you stay in the home. Deferred-payment loans must be repaid when you sell, refinance, or move. Low-interest loans are repaid monthly alongside your mortgage.
Can you get down payment assistance with an FHA loan?
Yes, many DPA programs can be combined with FHA loans. Since FHA loans require only 3.5% down, a DPA grant or forgivable loan can cover part or all of that amount. Some state HFAs specifically design their DPA programs to pair with FHA, VA, USDA, and conventional mortgages.
How do I find down payment assistance programs in my state?
Start by contacting your state housing finance agency. You can also search databases like the Down Payment Resource tool or HUD's list of approved housing counseling agencies. A knowledgeable real estate agent or mortgage lender can also help identify local and national programs you may qualify for.
Need Help Finding Down Payment Assistance?
A knowledgeable real estate agent can connect you with DPA programs and lenders in your area. Our matching service is free with no obligation.
Find My AgentUnderstanding Your Down Payment Assistance Search
Your down payment assistance search begins with understanding the many down payment assistance programs available in your area. The amount of down payment assistance you receive depends on program type, location, and eligibility. Many programs cover both payment and closing cost assistance, reducing the total cash needed for a home purchase.
Payment grants are the most popular form of DPA because they never require repayment. These grants come from state housing finance agencies like Fannie Mae partnerships, local nonprofits, and federal programs. A first-time homebuyer can combine grants with a first mortgage from an approved lender for maximum savings.
Programs typically require working with a participating loan officer who understands the application process. The sources of down payment funds must be properly documented for your lender. Whether you are making a home purchase for the first time or returning to homeownership after renting, exploring every available program maximizes your savings potential.
Start Your Path to Homeownership Today
Down payment assistance programs represent one of the most underutilized resources in real estate. With more than 2,600 programs available nationwide, the question is not whether help exists but which program best fits your needs. The average DPA benefit of $17,000 can transform homeownership from a distant dream into an achievable goal.
Begin by assessing your eligibility using the checklist above. Research programs available in your state and city. Connect with a lender experienced in DPA processing and a knowledgeable real estate agent who understands local assistance options. The home buying process becomes much more accessible when you take advantage of the financial help available to you.
You may be eligible for multiple programs simultaneously. Learn about down payment assistance through your state HFA, credit unions, and nonprofit organizations. Some grant programs cover payment or closing costs entirely. The assistance doesn't have to be repaid if structured as a grant. Even if someone hasn't owned a home recently, they qualify as a first-time buyer under federal guidelines.
Consider practical needs too. Set aside funds for home repair and maintenance after closing. The homebuying process is smoother when you plan ahead. Some programs from lenders like Bank of America offer additional closing cost credits alongside state DPA programs.
Remember that DPA programs have finite funding and application deadlines. The sooner you begin researching and applying, the better your chances of receiving assistance. Every day you wait is a day closer to programs closing their application windows. Take the first step today by exploring your options and getting pre-approved for a mortgage.