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Down Payment Assistance Programs: How They Work and How to Find One Near You

Saving for a down payment can feel like filling a swimming pool with a teaspoon. Down payment assistance programs hand you a bigger spoon. Here is how they work and where to find them.

By Keys & Coffee Editorial Team · Updated · 6 min read

Coins falling into a white piggy bank
Quick answers

  • What it is: down payment assistance (DPA) is money from state or local housing agencies, nonprofits and some employers to help with your down payment and sometimes closing costs.
  • Main types: grants, forgivable loans, deferred-payment loans and low-interest repayable loans.
  • Common rules: income and price limits, a homebuyer education class, living in the home as your primary residence and often being a first-time buyer.
  • Where to look: your state housing finance agency, HUD’s list of local homebuying programs and your city or county housing office.
  • Read the fine print: some help must be repaid when you sell, refinance or move out.

Saving for a down payment can feel like filling a swimming pool with a teaspoon. You are paying rent, prices keep moving and the target never seems to get closer.

Down payment assistance programs exist to close that gap. There are many of them across the country, run by states, cities, counties and nonprofits. The trick is knowing what kind of help you are getting and what strings come attached.

The main types of down payment assistance

Type Do you repay it? How it usually works
Grant No Free money toward your down payment or closing costs, often with conditions
Forgivable loan Not if you meet the terms A second loan that is forgiven over time, often if you stay in the home for a set number of years
Deferred-payment loan Yes, later No monthly payments; repaid when you sell, refinance or pay off the first mortgage
Low-interest repayable loan Yes, monthly A second loan with its own monthly payment, usually at a modest rate
Matched savings No A program matches the money you save, often through a partner organization

Some states also offer Mortgage Credit Certificates, which are not cash at closing but give eligible buyers a federal tax credit for part of their mortgage interest each year. The IRS form for claiming it is Form 8396.

Myth buster“Down payment assistance is only for very low incomes.” Many programs have income limits set well above minimum wage, and some are aimed at moderate-income households or specific jobs such as teachers or first responders. Check the actual limits in your area before you rule yourself out.

Who usually qualifies?

Every program writes its own rules, but these requirements show up often:

  • First-time buyer status. Many programs use HUD’s definition, which generally counts you as a first-time buyer if you have not owned a primary home in the past three years.
  • Income limits based on your household size and area.
  • Purchase price limits for the home.
  • A homebuyer education course, often from a HUD-approved housing counseling agency.
  • Primary residence. You have to live in the home, not rent it out.
  • Credit and loan requirements, such as a minimum score or using a participating lender.
Fun factUnder HUD’s first-time homebuyer definition, someone who has not owned a home in three years can count as a “first-time” buyer again. So yes, you can be a first-time buyer twice. Maybe even three times.

How DPA works with your mortgage

Down payment assistance sits alongside your main mortgage, not instead of it. You still need a first mortgage, and the DPA program has to be allowed by that loan type.

  • FHA loans allow assistance from certain sources, such as government agencies and family, for the 3.5% minimum down payment. Our guide to FHA loan requirements covers the basics.
  • Conventional loans from Fannie Mae and Freddie Mac allow approved second loans and grants, and their low-down-payment options pair well with DPA.
  • VA and USDA loans already allow zero down, but DPA can still help with closing costs. See our VA loan requirements guide.

Many state programs work only through approved lenders, so ask early whether a lender participates.

Example

You are buying a $300,000 home with an FHA loan. The 3.5% minimum down payment is $300,000 x 3.5% = $10,500. Suppose you receive $10,000 in assistance.

  • As a grant or 0% deferred loan: no extra monthly payment. A deferred loan would be repaid when you sell or refinance.
  • As a repayable second loan at a hypothetical 6% over 10 years: about $111 a month on top of your mortgage.

Same $10,000 of help, very different effect on your budget. Terms here are illustrative only.

Add any second-loan payment to your mortgage payment in our mortgage calculator, then check the full budget with the home affordability calculator. Do not forget closing costs: our closing cost calculator gives a ballpark.

The fine print to check

  1. Repayment triggers. Does the money come due if you sell, refinance or move out?
  2. Forgiveness timeline. If it is forgivable, how many years do you need to stay?
  3. Interest rate on the first mortgage. Some programs come with a slightly higher first-mortgage rate. Compare the total cost, not just the free money.
  4. Limits on future refinancing. Some second loans must be paid off or approved before you refinance. Our refinance guide explains why that matters.
  5. Funding availability. Some programs run out of money for the year, so apply early.

How to find programs near you

  • Your state housing finance agency. Nearly every state has one, and most offer some form of homebuyer help.
  • HUD’s local homebuying programs list, organized by state, on HUD.gov.
  • Your city or county housing department. Local programs are often less known and less crowded.
  • A HUD-approved housing counselor. They know local programs and can often provide the required education class.
  • Fannie Mae’s and Freddie Mac’s online DPA search tools, which list programs by location.
  • Your employer. Some employers offer homebuying benefits.

Ask lenders too, but remember that a lender may only mention programs it participates in. Our pre-approval guide explains how to start that conversation.

Your DPA game plan in five steps

  1. Check your basics: household income, savings, credit and the price range you are aiming for.
  2. List two or three programs from your state agency and local housing office whose limits you meet.
  3. Take the homebuyer education course early. Certificates often stay valid for a while, and you will learn a lot.
  4. Find a participating lender and ask how the assistance will appear on your Loan Estimate.
  5. Get every term in writing before closing, especially repayment and forgiveness rules.

One more tip: be wary of anyone who charges you a fee just to “find” grant money. Legitimate public programs and HUD-approved counselors will point you to the official applications.

FAQ

Do I have to pay back down payment assistance?

It depends on the type. Grants usually do not need repayment, forgivable loans are forgiven if you meet the terms, and deferred or repayable loans must be paid back.

Can I get down payment assistance if I have owned a home before?

Often yes, if you have not owned a home in the past three years or if the program is open to repeat buyers. Check each program.

Can I combine assistance with an FHA loan?

Yes, FHA allows assistance from approved sources such as government agencies, as long as program rules are met.

Does down payment assistance slow down closing?

It can add steps, such as approvals from the program and a homebuyer class. Start early and tell your agent and lender upfront.

Is down payment assistance taxable?

Tax treatment depends on the type of assistance and your situation. Ask the program or a tax professional.

Keys & Coffee is an independent education site and is not a lender. Examples are for illustration only. Sources: U.S. Department of Housing and Urban Development (local homebuying programs, housing counseling and FHA rules), Consumer Financial Protection Bureau, Fannie Mae, Freddie Mac, Internal Revenue Service (Form 8396, Mortgage Interest Credit).

Keys & Coffee Editorial Team

We turn lender-speak into plain English. We check our numbers against official sources like the CFPB, HUD, Fannie Mae and Freddie Mac, and we update guides when the rules change.

Keys & Coffee is an independent education site. We are not a lender or mortgage broker, we do not take loan applications or payments, and nothing here is financial advice. This site is not affiliated with Axia Home Loans, Axia Financial, LLC, or Planet Home Lending. Rates and rules change often — always confirm details with a licensed loan officer and check any lender on the NMLS Consumer Access site.

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