Down Payment Assistance Programs

Down Payment Assistance Programs

For those at the low-to-moderate-income level, the most substantial barrier to homeownership are the closing costs and a down payment associated with obtaining a mortgage loan. Because of this, most house finance agencies (HFAs) provide some closing cost and down payment assistance (DPA) to qualified homebuyers in their states with low-to-moderate-income.

What Is a Down Payment Assistance Program?

DPA programs offer homebuyers low-interest loans and grants that decrease how much they must save for a down payment. Nationwide, there are over 2,000 of these programs. Country, state, or city governments operate a lot of them. DPA programs will vary by the location, but many homebuyers could qualify for thousands of dollars worth of assistance for down payments.

Most of the DPA programs through an HFA must be used along with a first-lien mortgage product the HFA offers. Several states provide stand-alone closing cost and down payment assistance that people can use in combination with any eligible non-HFA mortgage product. Certain DPA programs are focused toward certain populations, like:

  • Veterans and active military personnel
  • First-time homebuyers
  • Teachers

Others provide assistance for homebuyers who meet the purchase price and income limitations of their programs. Programs like these are structured in various ways including:

  • Zero interest
  • Forgivable grants
  • Full interest
  • Deferred payment second mortgages (sometimes called "soft seconds")
  • Fully amortizing second loans

A lot of HFAs also hand out federal funds to nonprofits or municipalities within their states for regional or local DPA or closing cost use. Frequently, these funds don't need to be used simultaneously with HFA first-lien mortgage products.

How Do Down Payment Assistance Programs Work?

State housing finance agencies provide this help to combine with county and city government programs to meet affordable housing needs. Frequently, the plans are provided along with mortgages targeted towards first-time homebuyers.

The types of closing costs and DPA vary by program. However, common types of assistance are:

  • Zero-interest, forgivable loans: These loans are forgiven over a specific time period like five years. You do not need to repay the money as long as you still own and live in the home after the period is over.
  • Grants: Certain programs offer an outright gift of money.
  • Zero-interest deferred-payment loans: While the terms and conditions can vary, typically no payments on the closing cost and down payment loan are due until you sell your home, you refinance the mortgage or your mortgage reaches the end of the term.
  • Low-interest loans: You must repay these types of loans over a specific period, like 10 years. They make it more attainable to own a home by spreading out your closing costs and down payment over multiple years.

Do I Qualify for a Down Payment Assistance Program?

DPA programs are usually meant for first-time homebuyers. A repeat homebuyer could be counted (and often is) as a first-time buyer if, in the past three years, they have not owned a home. Other requirements may include buying a home in a particular "qualified" area or income caps.

Each DPA program is a bit different. The exact requirements for qualifying will depend on your location and the programs available.

However, many have guidelines that are similar, including:

  • Buyers often need to have low- to moderate-income
  • Restricted to first-time homebuyers
  • The DPA is used together with an approved mortgage program
  • The buyer uses the home as their main residence
  • The buyer uses an approved mortgage lender for a loan program
  • The house is in a "targeted" census tract

Each program will vary by zip code. However, you are likely to more readily qualify if you are purchasing in a "target area." so to speak.

How to Apply

Here's how you can get started:

  1. First, you will want to browse the different DPA programs your state's housing finance agency offers. Check out first-time home buyer state programs to find out about programs in your location.
  2. Next, check with your county and city to see if they provide any local first-time homebuyer grant programs.
  3. Then, visit the local government agency website or organization administering the program to see about DPA requirements and obtain a list of approved mortgage lenders.
  4. Lastly, apply for a mortgage through a lender approved for working with the grant program. You might want to check with local agencies about recommended loan officers with experience helping individuals apply for grants administered by them.


DPA can make a substantial impact on your home buying potential. It helps you buy a home more quickly. Many buyers are stuck on the sidelines, putting money aside and watching interest rates rise and fall. DPA programs might offer grants or forgivable loans for your closing costs and down payment. Resources like these can instantly build your buying power and help you buy a home much quicker.