Down payment assistance (DPA) is money from a government agency, nonprofit or employer that helps cover your down payment, closing costs or both. Thousands of programs exist across the country, and most buyers who qualify never apply because they don't know the programs are there. This guide explains the types, the usual rules, and how to find and use a program, step by step.
Step 01 of 08
Learn the types of assistance
The type of assistance decides whether you ever pay it back and when:
- Grant. Not repaid. Some grants still require you to live in the home for a short period.
- Forgivable loan. Recorded as a second mortgage with no payments. A portion is forgiven each year you live in the home, and it is fully forgiven after the set term, often 3 to 10 years. If you sell or refinance before that, you repay the remaining balance.
- Deferred loan, sometimes called a silent second. No monthly payment and often 0% interest, but you repay it in full when you sell, refinance or pay off the first mortgage.
- Repayable second mortgage. A low-rate loan with monthly payments that runs alongside your first mortgage.
- Mortgage credit certificate (MCC). Not cash at closing. It gives you a federal tax credit for part of the mortgage interest you pay each year.
Figure 1
How much you owe on $10,000 of assistance, year by year
- Deferred loan
- Repayable second mortgage
- Forgivable loan (5 years)
- Grant
Years in the home
Source: HouseBuyerGuides.com calculations. Example terms: forgivable loan forgiven evenly over 5 years; deferred loan at 0% due when you sell, refinance or pay off the mortgage; repayable second mortgage at 5% over 10 years. Real programs set their own terms.
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| Years in the home | Deferred loan | Repayable second mortgage | Forgivable loan (5 years) | Grant |
|---|---|---|---|---|
| 0 | $10,000 | $10,000 | $10,000 | $0 |
| 1 | $10,000 | $9,209 | $8,000 | $0 |
| 2 | $10,000 | $8,378 | $6,000 | $0 |
| 3 | $10,000 | $7,504 | $4,000 | $0 |
| 4 | $10,000 | $6,586 | $2,000 | $0 |
| 5 | $10,000 | $5,620 | $0 | $0 |
| 6 | $10,000 | $4,606 | $0 | $0 |
| 7 | $10,000 | $3,539 | $0 | $0 |
| 8 | $10,000 | $2,418 | $0 | $0 |
| 9 | $10,000 | $1,239 | $0 | $0 |
| 10 | $10,000 | $0 | $0 | $0 |
"Grant" is used loosely in advertising. Read the program terms to see whether you are getting a true grant or a forgivable or deferred loan.
Step 02 of 08
Know who offers it
- State housing finance agencies. Every state has one, and most run at least one statewide program. These usually come with their own first mortgage through participating lenders.
- Cities and counties. Often funded by federal HOME or CDBG money, with income limits tied to area median income and a requirement to buy inside the city or county.
- Nonprofits and housing authorities. Programs for certain neighborhoods or groups of buyers.
- Employers and occupation programs. Some hospitals, universities and cities help their own staff. Others serve teachers, police officers, firefighters or health workers.
- Lenders. Some offer their own grants or closing cost credits, often for buyers in certain census tracts.
Local programs can often be combined with a state program, which is how buyers in some areas get most of their upfront costs covered. See how to stack down payment assistance.
Figure 2
How layered help can cover upfront costs
- State program
- City or county program
- Seller credit
- Your cash
Upfront costs
Source: HouseBuyerGuides.com calculations. Illustrative only. Whether programs can be combined, and how much each pays, depends on the programs, your lender and your contract. Many programs require a minimum contribution from the buyer.
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| State program | City or county program | Seller credit | Your cash | Total | |
|---|---|---|---|---|---|
| Upfront costs | $8,000 | $7,500 | $2,500 | $1,500 | $19,500 |
Step 03 of 08
Check the common requirements
Every program sets its own rules, but most include some of these:
- Income limit, usually a percentage of the area median income (AMI) adjusted for household size
- Purchase price limit
- First-time buyer status, usually no ownership in the past three years. Some programs waive this for veterans or targeted areas.
- Minimum credit score, often 620 to 680
- Homebuyer education from an approved provider
- Owner occupancy. You must live in the home as your main residence.
- Your own contribution. Some programs require you to put in a small amount, such as $1,000 or 1% of the price.
- Property type and location limits
The program pages on this site list the limits we have verified for each program, with a link to the official source.
Step 04 of 08
Find programs for your address
Programs depend on where the home is, not where you live now. Search the state and city you want to buy in on this site to see the statewide and local programs that serve it. You can also browse every program by type, or answer a few questions on the program finder to get a shortlist.
Check the funding status. Many local programs run on yearly budgets that can run out before the year ends, and some reopen on a set date. We show when a program has paused or closed.
Step 05 of 08
Choose a participating lender
For most state programs and many local ones, you apply through a lender, not the agency. Only approved lenders can originate the program, so:
- Open the program's participating lender list.
- Get Loan Estimates from two or three of them.
- Ask each one which programs they close often and how long approval takes.
Then get pre-approved with the lender you choose. Tell them up front which programs you plan to use.
Step 06 of 08
Complete homebuyer education
Take the required course early, from a provider the program accepts. Online courses usually take a few hours, and HUD-approved counseling agencies also offer in-person classes and one-on-one counseling. Send the certificate to your lender as soon as you have it.
Step 07 of 08
Shop within the program's limits
Keep the program's price limit, property type rules and service area in mind while you shop. When you write an offer, leave enough time before the closing date for the program's review. Some local programs need a week or more after the lender approves the loan. Some also require their own inspection or a check on lead-based paint in older homes.
Step 08 of 08
Close and keep the terms in mind
At closing you sign the assistance documents, which for a loan usually means a note and a second mortgage or lien. Keep copies. Write down:
- How long you must live in the home
- What happens if you sell, refinance or rent the home out before then
- Whether the amount you owe goes down each year
If you plan to refinance later, ask the program whether the assistance must be paid off or can be "subordinated" to the new loan.
Weighing the cost
Assistance is not always free money. Some state programs charge a slightly higher interest rate on the first mortgage that comes with the assistance, and deferred loans have to be paid back eventually. Ask your lender for two Loan Estimates, one with assistance and one without, and compare the monthly payment, cash to close, and total cost over the years you expect to stay.