Between making rent payments and balancing other financial responsibilities, finding extra money for a down payment on your first home can feel impossible. A first-time homebuyer grant can help.
How do first-time homebuyer grants work?
You’ll find many options for financial help as a first-time homebuyer, but there’s one key piece that separates grants from other forms of help: You don’t ever have to pay the money back. The funds from a grant can help you cover a down payment on a home and the closing costs you’ll need to hand over before you move in. Some grant programs are available to those who have purchased a home before, too.
Because they’re essentially free money, first-time homebuyer grants differ from other down payment assistance programs, which can help you afford a home in the present but come with some strings attached for the future. Here’s a rundown of these other types of assistance programs:
- DPA second mortgages – A DPA second mortgage — the DPA stands for “down payment assistance” — is available through many states’ housing finance agencies. In a DPA second mortgage program, you’ll apply for a 30-year mortgage to finance the home, and then another mortgage for a smaller amount to help with the down payment or closing costs. Just like the first mortgage, this second loan comes with an interest rate (although it might be lower to avoid racking up high finance charges), and you’ll pay it back over a period of time.
- Deferred-payment loans – Instead of requiring you to immediately start paying back the down payment assistance funds, some programs allow you to defer these payments until you sell your home or refinance or pay off your mortgage. The assistance won’t accrue interest in the meantime, so the amount you owe won’t grow.
- Forgivable loans – Forgivable loans are the closest cousin to grants because they can wind up being free — but only if you live in the home long enough. For example, you might be able to borrow $5,000 to help with a down payment, with the loan balance reduced every month over 10 years. If you move before that time frame’s up, you’ll need to pay back a portion of the loan. If you stay in the home for 10 years, though, it’ll be completely forgiven.
- Individual Development Accounts (IDAs) – IDAs are matched savings accounts designed for those with certain work and income parameters, typically those with a low income. IDAs are offered through some public housing organizations and private nonprofits and usually provide a dollar-for-dollar match, up to a specific amount, for savings goals, including a down payment and closing costs.
6 first-time homebuyer grants
1. HomePath Ready Buyer program
The HomePath Ready Buyer program is a homebuying program from Fannie Mae, one of two government-sponsored enterprises that back the mortgage market. With this program, you can get up to 3 percent of your home’s purchase price to help with closing costs. However, you’re limited in what you can buy — you can only qualify if you’re buying a HomePath property, a foreclosed home owned by Fannie Mae. You’ll also need to complete a homebuyer education course.
2. National Homebuyers Fund
The nonprofit National Homebuyers Fund sponsors down payment and closing cost grants that can total up to 5 percent of your home’s purchase price. You don’t have to be a first-time homebuyer to qualify, but you do need to find a mortgage lender that participates in the program. You can call the organization for assistance finding lenders in your area at 866-643 4968.
3. Bank of America grant programs
Bank of America offers two grant options to help with a down payment and closing costs: the America’s Home Grant and Down Payment Grant programs. America’s Home Grant provides up to $7,500 in lender credits for closing costs, while the Down Payment Grant provides up to $10,000 in down payment help. You’ll have to get your mortgage from Bank of America, however, and for the Down Payment Grant, there could be tax implications.
Read Bankrate’s Bank of America mortgage review.
4. Chase Homebuyer Grant
If you’re purchasing a home in what the government defines as a “low to moderate income census tract,” you could be eligible for up to $2,500 of grant money from Chase bank. The bank also offers homebuyer grants of up to $5,000 to borrowers in thousands of majority Black neighborhoods across the U.S. These funds are primarily applied to the closing costs (but can also go toward your down payment, depending on how the costs shake out). Your loan officer can help you determine whether your location and situation qualify.
Read Bankrate’s Chase mortgage review.
5. Good Neighbor Next Door program
While the Good Neighbor Next Door program technically falls under the “forgivable loan” category, the potential free money is so notable we’ve included it here. Available to law enforcement officers, teachers, firefighters and emergency medical technicians, this program from the U.S. Department of Housing and Urban Development offers a 50 percent discount on homes in designated revitalization areas. As long as you live there for three years, you get the property for half off the list price with no need to pay that discount back. As with the HomePath program, you won’t have the freedom to buy just any home, however.
6. Downpayment Toward Equity Act
Introduced in the summer of 2021, the Downpayment Toward Equity Act would help first generation first-time homebuyers get up to a $25,000 grant. As it stands, you would need to be the first member of your family to purchase a home in order to qualify. The standard award would be $20,000, with an additional $5,000 for those who qualify as a “socially and economically disadvantaged individual.” The bill has not been made law.
How to qualify for a first-time homebuyer grant
Not all first-time homebuyers are eligible for first-time homebuyer grants. These programs tend to be geared toward those who can be classified as a low- or moderate-income borrower, and that definition depends on your income and where you want to live. While eligibility requirements vary, here are a few elements common to most grant programs:
- Income limits: Many programs designate households that earn 80 percent or less of the area median income (AMI) as “low-income,” and limit the program to those in that range. The income limits also vary based on how many people are in the household.
- Home price limits: You also might be restricted to a certain budget. Again, these limits vary widely based on the local housing market.
- Your contribution to the purchase: While you’ll get assistance for the purchase, many grants stipulate that the homebuyer needs to also chip in. One common ask is either 1 percent of the purchase price or $1,000 (whichever is greater).
- Your residence status: You typically can only get a grant to help buy a home you’ll actually make your primary residence, not one you’ll rent out to someone else.
- Additional education: Many grant programs require you to complete a homebuyer education course prior to receiving the funds.
How to find local or state first-time homebuyer grants
In addition to nationally available grant programs, you might be able to find financial assistance from an organization closer to home (or where you want your home to be). Start exploring your options here.
Ask your real estate agent for advice, as well. These professionals have been through the process and can point you toward grant programs. They can also help you tour neighborhoods and specific properties that satisfy purchase price and zip code requirements.
When shopping around for a mortgage lender, don’t discount local credit unions and community banks. Since they have roots in the area where you want to buy, they have a deep knowledge of additional opportunities that might be right for you. In fact, they may even offer programs of their own. For example, First Federal Bank of Kansas City offers eligible buyers a grant of up to $3,000. Illinois-based Wintrust Bank has a first-time homebuyer grant program that helps borrowers get $2,000 for a down payment. New York-based ESL Credit Union has a matching program for Black and Latinx first-time homebuyers that can provide up to $10,500 of grant money. Similar programs are available in many places; you just have to do some extra research to find them.
How to apply for a first-time homebuyer grant
Most grant programs come with minimum credit score requirements. Before you apply, review your credit report and check your credit score. Once you’re ready, complete your application online. You might be able to apply for multiple grants, too, so don’t be shy about trying to score more financial assistance.