Not everyone has the financial means to make a down payment on a home. With the  median existing-home price around $400,000, a prospective buyer needs $80,000 for the standard 20 percent that conventional loans require. Even the more modest down payments required by government loans amount to serious five figures.

The good news is, help exists. There are programs that can help aspiring homeowners with that  down payment. Here’s how they work, and how to get down payment assistance.

40%

The percentage of U.S. adults and would-be home-buyers who cite being unable to afford a down payment and closing costs as reasons for not owning a home.

Source: Bankrate Financial Security Survey April 2023

What is a down payment assistance (DPA) program?

Down payment assistance programs are loans and grants designed to provide prospective home buyers with some of the ready money they need to contribute towards the home purchase. Some programs also help with closing costs, which are the fees and charges you pay when you finalize your mortgage. These total approximately 2 percent to 5 percent of the loan principal (and more when you factor in the escrow for insurance and taxes). For instance, on a $200,000 loan, the closing costs could be around $4,000. If all of your ready money has gone to saving for a down payment, you might need help paying for closing costs.

There are thousands of these types of assistance programs nationwide. While a few programs exist at the federal level and even with some individual lenders, the majority of down payment help is offered at the local level through state, county and city government programs, and come in the form of a loan, grant or matched savings.

Down payment assistance eligibility requirements

The vast majority of down payment assistance is offered to first-time homebuyers. However, “first-timer” can mean not just an actual newbie, but also someone who has not owned a home in the last three years. Many cities and counties have other housing programs available, but down payment assistance is typically reserved for people meeting these criteria.

Also: Many programs restrict owners of rental or investment properties from participating, so the home should be your primary residence, and it should be a single-family home. Some programs might allow a duplex or small multi-family property (four or fewer units), if you will be one of the occupants.

Types of down payment assistance loans and programs

Grants

Grants are a type of down payment assistance that provides a one-time cash sum, often in the form of a no-interest second loan. The money can be used to cover all, or part of, a down payment or closing costs. The funds don’t have to be repaid and are typically geared toward those who are low- or moderate-income borrowers. There are even some grant programs available to those who have previously purchased a home. Grant funds are typically available through banks and state and local governments.

Forgivable loans

Forgivable loans are technically loans, but effectively grants — because you might never have to pay them off. That’s what the “forgivable” part means: Generally, forgivable loan debt is erased after a certain period of time so long as you still own the home and are up-to-date on your mortgage payments. If you move before the specified period of time associated with the loan, it’s likely that you’ll need to pay back a portion of the funds. Often these loans are available through state housing finance agencies.

Low-interest loans

This type of home down payment assistance functions like a second mortgage: It’s an additional lien against your home, albeit at lower-than-market-rate terms. Low-interest loans must be repaid, typically over the course of a few years. You repay this loan, in addition to your regular mortgage, which means you’ll have more monthly payments to make. These may be offered by a variety of mortgage lenders.

Deferred-payment loans

Deferred-payment loans generally don’t charge interest, which means you are only responsible for repaying the amount you borrow (the principal). However, deferred payment loans are not forgiven. They will need to be repaid in full when you sell your home or refinance your mortgage. This type of lending is often offered via state and local home buyer assistance programs.

Individual Development Accounts (IDAs)

Also called a matched-savings account, an IDA is a special savings account through which the account holder’s contributions are matched by either private or public money. This kind of matched savings program typically comes with income caps and employment requirements, and participants usually need to complete free financial literacy training. IDAs are generally offered locally at the state level or through private nonprofits. The money can be used for down payment and closing costs.

Lender-specific down payment assistance programs

Some mortgage lenders offer their own down payment assistance. For example, in many states, Chase offers from $2,500 to $5,000 that can go toward closing costs and down payment needs. While this program is just for first-time homebuyers, it does have other stipulations: You’ll need to get a 30-year fixed-rate loan and live in the home as your primary residence. You’ll also need to attend a homebuyer education course to receive the full amount.

How to get down payment assistance

Most payment assistance programs are local, though there may be a few statewide ones too. Some of the places to check out for down payment assistance include:

  • State housing finance authority: Many state housing finance authorities (HFAs) offer homebuying assistance and education.
  • City and county government programs: As a means to boost homeownership, many counties and cities offer down payment assistance programs for first-time homebuyers. Check your municipality’s website for more, or speak to your loan officer to get more details about local DPA programs in your region.
  • U.S. Department of Housing and Urban Development (HUD): Check HUD’s website for local homebuying programs by state. Every state also has HUD-approved counselors who will simplify the finer points of homebuying and help you find financial assistance.
  • Down Payment Resource: Down Payment Resource, a private company, provides a plethora of resources for homebuyers, real estate agents and lenders, including an eligibility and lookup tool via its platform.

Down payment assistance FAQs

  • Down payment assistance is available for all kinds of mortgages. Government-backed mortgage programs like FHA loans, VA loans and USDA loans often come with their own down payment assistance built-in. You can also apply for down payment assistance with conventional mortgages.

    Individual lenders are likely to have their own requirements and restrictions when it comes to how down payment assistance is accounted for and applied to your loan. So, if you know you’re planning to take advantage of a down payment assistance program, it’s a good idea to talk to prospective lenders about how this will affect your mortgage.
  • There is no shortage of down payment assistance options, but there is also no universal application that will go to all of them. Because of this, you will need to apply to each one individually. Depending on the program, you might call to see if you are eligible, complete the application online or in-person and possibly take certain education courses.

    Some programs require you to have a specific mortgage to qualify: for instance, an FHA loan instead of a conventional loan.

    Aside from being a first-time homebuyer, eligibility is usually based on income. Many programs target low- to moderate-income earners, so if you are in a higher bracket, you might not qualify. You might also need to contribute a certain percentage of your own income to get the assistance.
  • There are many benefits of using down payment assistance programs to purchase a home. When you’re struggling to gather enough money for a down payment yourself, these programs can help you become a homeowner faster. Assistance programs can also save you money on some of the upfront expenses associated with buying a home, including closing costs, which some assistance programs also cover. You may also be able to obtain more favorable mortgage terms when using down payment assistance. This would be the case if the down payment assistance allows you to put 20 percent down on your home purchase, eliminating the need to pay for private mortgage insurance (PMI). Lenders require home buyers to pay PMI if the down payment is less than 20 percent.
  • It’s not all upsides with down payment assistance. In some cases, the cost of a home could be higher over the long run if the down payment assistance is provided in the form of an interest-bearing loan that needs to be repaid. The process of qualifying for down payment assistance can also be time-consuming, as you’ll need to research all of the programs available and submit individual applications to each one. It’s also not unusual for some assistance programs to require that you occupy the home for a minimum number of years in order to have the assistance fully forgiven, which may not be ideal if the need to move arises.
  • Not everyone qualifies for down payment assistance programs. If you have owned a home in the last three years, your income is too high or you are planning to rent out the property or otherwise use it as an investment, you might not be eligible for many programs.

    However, there are other housing programs you might qualify for. Visit HUD.gov/states, select your state and click “Learn About Homeownership.” From there, you can find ways to avoid foreclosure, find home counseling services and get money for home renovations or repairs. Depending on where you live and your needs, you might find housing resources geared towards seniors, disaster relief and help to pay utility bills.

    Home assistance programs are vast and vary by needs and location. You might find that if you do not qualify for down payment assistance, you might be eligible for assistance in other ways.
  • Since programs are usually administered at the local level, the time it takes for them to disburse funds can vary widely. It’s best to initiate your research and applications as soon in the home-buying process as possible to give yourself as much runway as you can. Your lender will work directly with the assistance program to secure the necessary funds.
  • This, too, depends on where you are. Terms and funding amounts are determined primarily by individual states — find out what’s offered in your area, and what you need to do to apply, by contacting your state’s HFA.
  • In most cases, yes, you can use multiple sources of down payment assistance, provided you qualify. Check with your lender to ensure you’re obtaining a mortgage through a program that allows for more than one source of assistance.

Additional reporting by Mia Taylor