Saving for a down payment can feel like one of the biggest hurdles when buying a home. Fortunately, various down payment assistance programs are available to help you achieve your dream of home buying without a down payment saved up.
These programs cater to a wide range of buyers, from first-time homebuyers to those using FHA loans. They aim to reduce financial barriers and make buying a home more accessible. If you’re ready to explore your options, this guide is a great starting point.
Types of Down Payment Assistance
Support for your home purchase comes in several forms, each with unique benefits and requirements. Understanding the down payment options for first-time buyers and others can help you find the best fit for your needs.
Grants
Grants are essentially free money. These financial awards are typically provided by state and local governments, nonprofits, and banks to help cover your down payment. To qualify, your income may need to fall below a specific threshold, and you’ll likely need to meet location requirements. Most grants require you to use the home as your primary residence rather than an investment property or vacation home.
The availability and amount of grant funding vary by location. For example, the National Homebuyers Fund provides grants of up to 5% of the mortgage loan amount. Additionally, states like California offer specific state down payment assistance programs, such as the CalHFA Zero Interest Program (ZIP), which provides interest-free deferred payment assistance. Checking your state’s housing website can provide insights into what is available in your area.
Forgivable Loans
Forgivable loans are another great option for homebuyers. These loans don’t require repayment as long as you meet conditions like making on-time mortgage payments or living in the home for a set number of years.
Typically, forgivable loans have very low—or even no—interest rates. If you’re planning to stay in the home for the required period, these loans can essentially function as grants. For instance, some programs forgive the loan after five to 10 years of residency.
Low-Interest Loans
If you don’t have savings but want to move forward with a home purchase, low-interest loans can help cover the cost of your down payment. Unlike grants or forgivable loans, low-interest loans require immediate repayment alongside your mortgage. Work with your lender to secure the lowest rate possible to keep your monthly payments manageable.
Deferred-Payment Loans
Deferred-payment loans provide funds upfront for your down payment but act as grants in a way because they don’t require repayment until you sell or refinance the home. In some cases, repayment starts after a certain number of years. These loans often come with low or no interest, offering flexibility if you expect changes in your financial situation.
Eligibility Requirements for Down Payment Assistance
Eligibility for down payment assistance programs depends on factors like your income, location, and whether you’re a first-time buyer. Reach out to your state and local governments, nonprofits, or banks to learn about the qualifications for specific programs. Applying to multiple programs can also increase your chances of receiving support.
National Down Payment Assistance Programs
National and local banks, as well as federal programs like those offered by the U.S. Department of Housing and Urban Development (HUD), provide valuable resources for homebuyers. For example, many banks offer grants to customers who take out mortgages with them. Contacting your bank about its specific offerings is an excellent way to begin.
For federal resources, HUD’s Good Neighbor Next Door program offers significant discounts—up to 50% off the list price—for teachers, law enforcement officers, firefighters, and emergency medical technicians purchasing homes in revitalization areas. Programs like these are designed to encourage homeownership while supporting professionals who serve their communities.
State Down Payment Assistance Programs
State and local governments also play an important role in providing assistance. Many states offer grants, forgivable loans, and deferred-payment loans through housing finance agencies or HUD offices. These programs are excellent state down payment assistance options for qualified buyers.
Contact your local HUD office to learn more about down payment assistance in your local area.
First-Time Homebuyer Down Payment Assistance Programs
Programs designed specifically for first-time homebuyers make the transition to homeownership smoother and more affordable. These initiatives often focus on reducing upfront costs and can be a great resource for those entering the housing market for the first time.
The Federal Housing Administration (FHA) backs loans requiring as little as 3.5% down for qualified buyers. Additionally, many first-time homebuyer programs pair with state-specific assistance. For instance, Florida’s Hometown Heroes Housing Program provides up to $25,000 in aid to first-time buyers working in public service roles. These are some of the most effective programs that help first-time homebuyers with down payment challenges.
Down Payment Assistance for FHA Loans
FHA loans already require lower down payments than conventional loans, but combining these loans with financial support programs can make homeownership even more attainable. Many states, banks, and nonprofits offer down payment assistance on FHA loans, helping reduce financial barriers further.
For example, in Illinois, the IHDAccess Forgivable program offers 4% of the purchase price or up to $6,000 as assistance, which works seamlessly with FHA loans. Buyers can combine this support with the FHA’s 3.5% down payment requirement, significantly reducing upfront costs.
Pros and Cons of Down Payment Assistance
Down payment assistance programs come with both pros and cons. Home buyers should carefully review the requirements of any down payment assistance program they are considering. While these programs can provide support, they may also come with strings attached that need to be fully understood before committing.
Pros of Down Payment Assistance
One of the most significant advantages of down payment assistance is that it allows you to purchase a home sooner. For example, a 3.5% down payment on a $350,000 house is $12,250—an amount that could take years to save. With financial assistance, you can reduce this waiting period and move into your new home much sooner.
Another benefit is the ability to lower your monthly expenses. By using assistance to make a larger down payment, you may avoid Private Mortgage Insurance (PMI) and secure a better interest rate. Avoiding PMI can save you hundreds of dollars each month, while a lower interest rate can reduce your total loan costs by thousands over the life of the mortgage.
Additionally, down payment assistance allows you to preserve your emergency fund and maintain financial flexibility. Instead of depleting your savings for a down payment, you can keep cash on hand for unexpected expenses, such as home repairs, medical bills, or other emergencies.
Cons of Down Payment Assistance
One drawback of down payment assistance is the potential restrictions on relocation. Many grants, forgivable loans, and deferred-payment loans require you to live in the home for a specific number of years. If your circumstances change and you need to move, you may be required to repay the funds, which could complicate your plans.
Another concern is the risk of overextending yourself financially. Assistance programs may tempt you to purchase a more expensive home than you can comfortably afford. Even with help, higher monthly payments could strain your budget and make it challenging to manage other financial priorities, such as saving for retirement or paying down debt.
Buy a Home With Down Payment Assistance
If you’re interested in exploring down payment assistance programs, start by contacting your state and local housing authorities. These agencies can provide detailed information about eligibility, application processes, and funding availability.
Many organizations also offer online tools to help you determine your eligibility. For example, HUD’s website includes state-by-state resources to simplify the search for prospective buyers.
To learn more about other types of housing assistance, check out the HUD Housing Network's list of resources.
