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Down Payment Assistance: What It Is and How to Get It

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If you’re ready to become a homeowner, but don’t have enough cash in the bank for a down payment, there’s good news: You may qualify for down payment assistance grants and loans. Known as DPAs, these programs are available from the federal government, approved banks and nonprofit housing agencies.

Learn how down payment assistance programs work and determine if you’re eligible for money to help you buy a home sooner than later.

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What is down payment assistance?

Down payment assistance is money that’s made available to consumers to help them cover the upfront cash required by a lender to buy a home. The funds typically come from federal and state housing agencies, banks and local nonprofit housing authorities in the form of grants or low- or no-interest rate loans.

Some important things to know about down payment assistance loans:

  1. They never cover 100% of the cost of a home.
  2. The money is always used toward the down payment requirements of a mortgage.
  3. The money never comes directly from the federal government — it’s always provided to state and municipal governments in your area.

The U.S. Department of Housing and Urban Development (HUD) provides funding for and information about many of the DPA programs offered across the country.

How does down payment assistance work?

The process for getting down payment assistance varies depending on the program you apply for. However, you’ll need to qualify for a mortgage regardless of which DPA program you choose. That means you’ll need to:

  • Have credit scores that meet the program guidelines
  • Verify your income and employment history
  • Verify your total debt is not too high for the program requirements
  • Get an appraisal to verify the value of the home
  • Be fully approved for your mortgage before receiving down payment assistance

Types of down payment assistance programs

Most down payment assistance programs are offered as grants or second mortgages. The terms and conditions vary, so make sure you understand the restrictions in the fine print.


A grant is money that doesn’t have to be repaid. First-time homebuyer grants are usually offered through state or local municipalities. Some programs charge higher interest rates on the mortgage to cover the cost of the grants.

Second mortgages

Some first-time homebuyer programs record a lien on your home in addition to the mortgage you take out to buy a home, which means you’ll have two mortgages on your home — one for the down payment assistance and one for the rest of your home purchase.

It’s called a “second mortgage” because it’s placed behind your first mortgage, similar to a home equity loan or home equity line of credit (HELOC). In some cases you’ll make regular payments of principal and interest with stable payments for a set term at a fixed rate, just like you would with a home equity loan.

Other DPA second mortgages may be deferred or forgivable, but come with restrictions on how long you have to live in the home to avoid repaying the assistance. There are two terms worth knowing to avoid surprises down the road if you try to sell or refinance your home, recapture and silent second.

Recapture. This term refers to whether you have to repay the assistance if you sell or refinance your home. The amount you have to pay back usually drops the longer you’ve owned your home.

Silent second. A “silent” second is a lien recorded on your home equal to the amount of the down payment assistance you’re approved for. It usually doesn’t have to be repaid. However, the lien is not released until you’ve owned the home for a set time, and you could end up paying a portion of the assistance back if you try to refi or sell the home before then.

How to qualify for down payment assistance

In addition to meeting the minimum requirements set for the first mortgage, there may additional eligibility guidelines that may include:

  • Income restrictionsDPA programs are primarily geared to help low- to moderate-income borrowers buy homes.
  • Higher minimum credit score requirementsYou may need a score of 640 or higher to qualify for DPA programs. That’s significantly higher than the 580 FHA or 620 conventional minimum for standard down payment loans.
  • Eligibility in select neighborhoodsFHA down payment assistance is usually focused on qualified Census tracts to help revitalize communities and improve the quality of life for nearby residents.
  • Recent homeownership limitsHUD first-time homebuyer programs are typically available to buyers who haven’t owned a home in the last three years.
  • Length of ownership restrictionsDPA programs are designed to help promote homeownership, and borrowers must either own the property for a certain number of years, or repay the money.
  • Owner-occupancy limitationsTo prevent buy and flip investors from using down payment assistance, it’s only offered to buyers who plan to live in the homes.
  • Homeownership counselingSome programs require homeownership counseling before applying for a loan to help buyers understand the responsibilities and costs of homeownership.

How to find down payment assistance near you

  1. State and local housing finance agencies. Besides federal funding, state and local governments may sell tax-exempt bonds to provide down payment assistance. These programs are mostly geared toward low- to moderate-income buyers in targeted neighborhoods called “qualified Census tracts.”
  2. Employers. Large companies may offer down payment assistance to help recruit or keep employees in a particular area.
  3. Industry-specific programs. Employees in specific professions, such as law enforcement, the military, education and health care may qualify for DPA programs geared specifically toward them. Some options include:
  • Good Neighbor Next Door. Law enforcement officers, K-12 teachers, firefighters and emergency medical professionals can buy homes at up to a 50% discount under this HUD first-time homebuyer program. The catch: Buyers must live in the home for at least 36 months to avoid having to pay the assistance back.
  • Teacher Next Door. Educators can get a $8,000 grant or DPA of up to $10,681. Most closing costs are covered for eligible buyers.
  • Nurse Next Door. Medical staff, nurses and health care support employees may be eligible for grants and DPA at terms similar to the Teacher Next Door program.
  • Nonprofit housing agencies. Habitat for Humanity and NeighborWorks are examples of nonprofits that DPA money. They generally assist low- to moderate-income families trying to buy their first home.
  • First mortgage programs through banks. One important limitation of DPA programs: You can take out a first mortgage only with banks approved by your state’s housing finance agency. Not all lenders are approved to make loans with down payment assistance. If you’re already preapproved, ask your lender if they participate in down payment assistance programs.

How much down payment assistance can I get?

The amount you can qualify for depends on the DPA program you apply for. For example, in Arizona, the Pima Tucson Homebuyer’s Solution Program limits assistance to 2.5% to 6% of your sales price, compared to the Pima County/City of Tucson DPA program, which provides assistance up to 10% of the contract sales price.

You can also check the HUD local homebuying programs site to get details about the programs available in your state.

Frequently asked questions

What’s a normal down payment on a house?

According to the National Association of Realtors, the average down payment for first-time homebuyers has ranged between 6% and 7%.

How long does it take to get down payment assistance?

The time will vary depending on the program. Pay close attention to homebuyer education programs — many require you to complete the course before applying for any DPA programs.

Does a mortgage credit certificate help with my down payment?

No. A mortgage credit certificate (MCC) allows homeowners to take their mortgage interest deduction monthly instead of at tax time. Check with your state housing agency to see if any MCC programs exist.

Can I also get help with closing costs?

Yes. In addition to down payment assistance programs, some housing finance agencies also offer assistance with closing costs. Income and neighborhood restrictions are similar to DPA programs.

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