Down Payment Assistance Programs: Free Money for Homebuyers

Types of Down Payment Assistance

Grants: Free money that does not need to be repaid. Many state HFAs and local governments offer grants of $5,000-$25,000 for first-time buyers who meet income limits.

Forgivable Second Mortgages: Loans that are forgiven after you live in the home for a set period (typically 5-10 years). If you sell or refinance before the forgiveness period, you repay all or part of the loan.

Deferred Payment Loans: Second mortgages with no monthly payments that are repaid when you sell, refinance, or pay off the first mortgage. These effectively reduce your out-of-pocket costs at purchase.

Matched Savings (IDA) Programs: Programs that match your savings 2:1 or 3:1 for use toward a down payment. Save $5,000 and receive $10,000-$15,000 in matching funds.

Who Qualifies?

Most DPA programs target first-time homebuyers (anyone who has not owned a home in 3 years), though some programs are open to repeat buyers. Common requirements include:

• Income below 115-150% of area median income
• Minimum credit score (often 620-640)
• Purchase price below program limits
• Completion of homebuyer education course
• Primary residence occupancy

How to Find Programs in Your Area

Start with your state's Housing Finance Agency (HFA). Also check city and county housing departments, nonprofits like Habitat for Humanity and NeighborWorks, and employer-assisted housing programs. Your lender should also be familiar with local DPA programs they can pair with your mortgage.