Down Payment Tips & Programs
December 1, 2023
What is down payment assistance?
Down payment assistance programs offer loans and grants to help cover a portion or all the costs associated with closing and/or a down payment. At the time of this writing, there are over 2,000 programs in the U.S., many of which are headed by state, county, and city governments. The amount of assistance offered varies by location and need. One of the best places to start your search is on the U.S. Department of Housing and Urban Development (HUD) website under state information.
Who qualifies for down payment assistance?
Most programs are designed for first-time home buyers, but roughly 38 percent of homeownership programs are available to eligible repeat buyers. Even many first-time homebuyer programs are eligible to those who have not owned a home in the past three years. The typical requirements to qualify for down payment assistance include, but are not limited to:
- First-time home buyer
- Low- to moderate-income
- Purchasing a primary residence in an approved location
- Home is within local purchase price limits, which is usually a percentage of an area’s median home price
- Using an approved mortgage program and working with an approved mortgage lender
Which factors impact the decision?
There are several factors that impact how much down payment assistance you are eligible to receive, but some of the most common include:
- Debt-to-income ratio
- Home price
- Previous homeownership
- Completion of homebuyer education courses
Types of down payment assistance programs
Down payment assistance is typically offered through either a grant, loan, deferred loan, or forgivable loan.
- Grants – never have to be repaid
- Loans – must be repaid over a certain period
- Deferred loans – must be repaid when the loan term ends or once you move, sell, or refinance the home
- Forgivable loans – forgiven after a set number of years – often five years – as long as the borrower still owns and lives in the home when the period is over
How to find down payment assistance programs
The best way to find the down payment assistance program that works for you is to discuss the topic with a loan officer or broker. Other helpful resources include the housing finance authority in your state, city and county governments, HUD, and HUD-approved housing counselors.
As you search for the down payment assistance program that best fits your needs, keep in mind that each program varies. The criteria to qualify for assistance in one area could be much different than what is needed in another location. An experienced lender will be able to guide you through the process and point you in the right direction.