What is down payment assistance?

Couple seated on the floor beside a sofa research down payment assistance programs on a laptop.Image: Couple seated on the floor beside a sofa research down payment assistance programs on a laptop.

In a Nutshell

Down payment assistance programs offer grants, loans and matched savings programs to help you buy a home. Find out if you may qualify and what to expect.
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Down payment assistance programs could help you buy a house if you don’t have enough cash for a down payment.

The assistance can come in the form of a grant, a loan or a matched savings program. Depending on the program, there are various requirements you must meet to qualify.

Understanding down payment assistance programs, including how to qualify and what’s expected of you, can help you determine if down payment assistance is right for you.



What is down payment assistance and how does it work?

When you buy a home, most loan programs require a down payment. For conventional loans, the minimum requirement typically runs between 3% and 15%. FHA loans have a minimum down payment of 3.5%. Your down payment could amount to thousands or even tens of thousands of dollars.

For prospective homebuyers who don’t have that much money to put down, down payment assistance programs may be a solution. Down payment assistance helps cover that upfront requirement, either partially or completely. This assistance can work several ways:

  • Grants: This money doesn’t need to be repaid by the homebuyer, making it the most valuable form of down payment assistance.
  • Forgivable loans: These loans act like second mortgages, but you don’t have to repay them as long as you meet certain requirements (staying in the home for a set number of years, for example). If you move out, refinance or sell your home before the forgivable period ends, you may need to pay back some or all of the loan funds you received.
  • Deferred loans: Similar to forgivable loans, payment on a deferred loan isn’t required until you move, refinance or sell your home. There may be an option for forgiveness if you stay long enough, so make sure to ask your lender its specific rules.
  • Second mortgages: In some cases, lenders may allow you to take out a low-interest second mortgage loan that you’ll make regular payments on, just as you do with your mortgage loan. These are sometimes referred to as “amortizing” second mortgages.
  • Matched savings programs: With this type of program, an organization will match savings that you deposit into an account with the organization. You can then use the full amount when purchasing the house. In some states, the match is higher than a 1-1 ratio. For example, Virginia’s program matches $8 for every $1 saved (up to $4,000).

Who offers down payment assistance programs?

Down payment assistance programs are often offered by state and local government agencies as well as housing finance agencies, or HFAs. If you’re interested in getting help with your down payment, search state home loan assistance programs based on where you live. You may also ask your loan officer or mortgage broker about down payment assistance programs in your area.

Finally, consider visiting the U.S. Department of Housing and Urban Development’s website to get a list of down payment assistance programs for your state.

The Chenoa Fund is one program that’s offered in most states through the CBC Mortgage Agency, which is a federally chartered, tribally owned enterprise.

Do I qualify for down payment assistance?

While the idea of down payment assistance is likely appealing to most prospective homebuyers, not just anyone can qualify.

Eligibility varies by program. For example, while many programs are targeted to first-time homebuyers, others are designed for members of the military community, teachers or other groups of people.

It’s important to note that the definition of a first-time homebuyer can also vary by program. For example, it may include people who haven’t owned property in the last three years or divorced people who owned a home with their ex-spouse but not on their own.

In general, though, these programs are for low- to moderate-income homebuyers who are buying a single-family, owner-occupied home. In other words, you can’t get one for an investment property or a second home.

Additionally, there may be restrictions based on the purchase price, location, your credit or factors. You may need to take a homebuyer education course to get approved.

You’ll also want to look at what requirements there are after you receive the assistance. If it’s a grant, you may be free and clear as soon as you close. But if the loan or matched savings require you to stay a certain amount of time to be forgivable, consider that in your plans to move, refinance or sell the home in the future.

What do I need to apply?

Start by exploring your options, including programs offered by your state, local government agencies, lenders and community organizations. Review what each program offers and the eligibility requirements to narrow down your list of options.

Then take steps to apply for assistance through the program of your choice. In general, you’ll need to show proof of income and other requirements set by the program.

You may need to choose a lender from a list of approved lenders provided by the program. If you’re already working with a lender, you may need to switch to a new one or find a program with the lender on its approved list.

Throughout the process, it’s important to communicate with the lender and assistance provider to make sure everything is on track for closing.


Next steps

If you’re considering buying a home and you believe you might qualify for down payment assistance, start looking at the options that are available where you live. Plus, make a plan to start saving for a house on your own. While these programs can help, they won’t necessarily cover the full down payment requirement.

It’s also a good idea to check your credit scores and review your credit reports to get your finances ready to buy a house.


Want to learn more? Check out some of our top mortgage lenders for first-time homebuyers.

  • Homebridge Mortgage: Homebridge offers resources that specifically cater to first-time homebuyers.
  • Rocket Mortgage: Consider Rocket Mortgage if you’d prefer an online-first experience.
  • PennyMac Mortgage: PennyMac offers a wide variety of home loans and shares current rates on its site, which can be helpful for people looking to buy their first home.
  • USAA Mortgage: USAA is a good option for military members and their families. 


About the author: Ben Luthi is a personal finance freelance writer and credit cards expert. He holds a bachelor’s degree in business management and finance from Brigham Young University. In addition to Credit Karma, you can find his wo… Read more.