You can choose from several types of down payment assistance programs. What you qualify for will depend on what is available in your local area, the home you want to buy, and your household income.
Grants
This type of down payment assistance is for qualified home buyers to help with the down payment and other closing-related costs. Those who receive funds typically don’t have to pay back the amount they receive, but you may have to meet specific criteria.
For example, many first-time home buyer grants require recipients to complete a housing counseling class approved by the U.S. Department of Housing and Urban Development (HUD).2
Some grants may only be available to low-income home buyers. The American Dream Downpayment Initiative, part of the HOME program, is one such program available in participating states.3 It offers an average of $7,500 in grants with the upfront costs of buying a home, including the down payment.
Matched savings programs
A matched savings program is meant for first-time home buyers who need help saving for a down payment or related closing costs.4 Depending on the program, it will match the amount you put towards savings (typically at a one-to-one ratio). So if you were to participate in a program that matches dollar for dollar what you contribute and you save $800, you’ll receive an additional $800. This amount needs to be used towards initial housing costs.
Several state government agencies offer matched savings accounts, also called Individual Development Accounts (IDA).4 These homeownership IDAs require participants to contribute over a predetermined period. Government agencies may also choose to work in partnership with local nonprofits and community organizations.
You will typically need to meet more strict income requirements and take a HUD-approved homebuyer education class for an IDA.
No-cost loans
Local and state housing agencies give these loans to help with down payments. If you can meet the criteria for a loan, you won’t need to pay any interest, and payment is typically deferred for several years as long as you meet residency requirements. The amount you receive depends on factors like your home’s purchase price and loan minimums.
Some programs may also offer forgivable loans through participating mortgage lenders, where your loan will be forgiven if you meet the requirements.5 Criteria may include meeting income thresholds and living in the home for a certain number of years.
