Down Payment Assistance Programs: How to Buy Your First Home with Financial Help

It's never too late to achieve homeownership, and numerous down payment assistance (DPA) programs exist to help buyers, regardless of age or income level. These programs, often underutilized, can provide grants or low-interest loans to cover your down payment and closing costs. Based on our experience assessment, understanding these resources is the first step toward making your home purchase affordable. This guide outlines the key types of assistance available at the state and federal level and how to find them.

What Are Down Payment Assistance Programs?

Down payment assistance programs are typically administered by state housing finance agencies or local non-profits to help residents, particularly first-time homebuyers, purchase a home. Contrary to popular belief, these programs are not exclusively for low-income households. "Homebuyers in higher-cost markets shouldn’t be afraid to explore down payment assistance options," advises a industry executive. "While many programs have income and purchase-price limits, they are generally surprisingly flexible and are market-adjusted based on local median incomes."

What State-Level Assistance Programs Are Available?

State programs offer significant financial support with specific eligibility criteria. Here are a few examples of state-run programs:

• Minnesota Housing Finance Agency Start Up: This program offers affordable mortgages with fixed interest rates and down payment assistance of up to $18,000 for eligible first-time homebuyers.
• Kansas Housing First Time Homebuyer Program (FTHP): This program provides a 0% interest loan for 15-20% of the home's purchase price. The loan is forgiven if the buyer lives in the home for at least 10 years.
• CalHFA Conventional Loan Program: The California Housing Finance Agency provides conventional mortgages with fixed rates, which can be combined with down payment assistance.

Program details and funding can change, so it's crucial to check with your state’s housing finance authority for the most current information.

What Federal and Specialized Programs Can Help?

Beyond state programs, several federal and demographic-specific options can make homeownership more accessible.

• FHA Loans: Backed by the Federal Housing Administration, these loans allow for down payments as low as 3.5% and have more flexible credit score requirements.
• HomeReady and Home Possible: These programs permit a 3% down payment from various sources, including grants and gifts, and feature reduced private mortgage insurance (PMI) costs.
• VA Loans: For eligible veterans and service members, VA loans require no down payment and no mortgage insurance.
• USDA Loans: These loans are designed for homes in eligible rural areas and often require no down payment.
• Good Neighbor Next Door: This program offers a 50% discount on the list price of a HUD-owned home in a revitalization area for teachers, law enforcement officers, firefighters, and EMTs.

How Do I Find and Access These Programs?

Locating the right program requires research. A recommended first step is to visit your state’s dedicated page on the U.S. Department of Housing and Urban Development (HUD) website. You can also contact your local housing authority. When working with a real estate agent or mortgage lender, ask them specifically about down payment assistance options, as many have tools to identify programs for which you may qualify.

To successfully buy your first home with financial assistance, start your search early and get pre-approved with a lender who has experience with DPA programs. Be prepared to provide documentation of your income and assets. Thoroughly research all eligibility requirements for any program you consider, as terms can vary significantly. By leveraging these resources, you can make a strategic and informed step toward homeownership.