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When taking out a mortgage, you might have to provide a lump sum of money as the down payment. Requirements vary, but even a small down payment can become an issue if you’re strapped for cash.
Down payment assistance programs can help you bridge the gap between what you’ve saved and what you need to put down.
There are more than 2,500 grant and loan programs nationwide that can provide down payment assistance, according to a report by the Urban Institute. Better yet, they’re not just for first-time homebuyers.
Here’s what you need to know about mortgage down payment assistance programs:
- Who qualifies for down payment assistance programs?
- Types of down payment assistance programs
- How to find down payment assistance programs
Who qualifies for down payment assistance programs?
Most down payment assistance (DPA) programs are limited to first-time homebuyers, but this isn’t always the case.
Each program sets its own requirements and its own definition of “first-time homebuyer.” You could qualify even if you’ve owned a home in the past.
Some programs are also geared toward helping people in particular professions, such as military service members, firefighters, teachers, health care workers, and law enforcement.
Here are some common requirements for down-payment assistance programs:
- You’re a first-time homebuyer (you haven’t owned a home in the last three years).
- Your income meets the program’s requirements.
- Your credit score fits the program’s minimum criteria.
- The home you’re buying will be your primary residence.
- The mortgage adheres to certain loan limits.
- You might also need to take a homebuyer education course.
Requirements vary from program to program, and some are less restrictive than others. If you’re not sure if you qualify, contact the program and ask about your options.
Keep Reading: How Much Down Payment Do You Need to Buy a House
Types of down payment assistance programs
Before you submit your application, it’s important to find out whether the loan has to be repaid later on.
Some programs never require repayment, while others give out loans that must be repaid when you sell the home or refinance your mortgage.
Down payment assistance grants don’t need to be repaid, so this can be an appealing option for eligible borrowers who lack the savings for a down payment.
Down payment assistance — for both grants and loans — can range from $2,000 to more than $39,000, according to the Urban Institute report. Programs usually spell out how you can use the funds.
Down payment assistance loans are set up as a second mortgage and will need to be repaid at some point, so it’s important to know when the bill will come due.
Depending on the program, there are different types of loan assistance:
- Forgivable loans: If you live in the home for at least a set amount of time — around five to 15 years — then the lender forgives the debt. But if you move, sell the home, or refinance the mortgage before this time period is up, you’ll need to repay the loan.
- Deferred-payment loans: These loans will need to be repaid — usually when you move, sell the home, or refinance the mortgage.
- Low-interest loans: This works like a regular loan, which you’ll pay down along with your main mortgage.
Learn More: 5 Types of Mortgage Loans: Which One Is for You?
How to find down payment assistance programs
Some federal government loan programs offer down payment help, while other programs can be found at the state, county, and city levels. Prospective homebuyers will have to search for and apply for these individually, as there’s no universal application.
Check out Credible’s state-by-state roundup of first-time homebuyer programs, or conduct a search yourself. Here are some things to keep in mind during your research:
Start looking with your state housing agency
State housing agencies are nonprofit organizations that provide information about affordable housing, financial assistance, and community development activities in your state. This is your best bet for finding state-specific information.
Head to your state government website if you want broader information about housing programs, or target a Google search for a “down payment assistance program” in your state.
Don’t forget county and city housing agencies
Your county or city might offer additional programs, so check your state website for a link to your locality’s website. Once you’re there, search for links to housing assistance or public services.
If you can’t find what you’re looking for, try a Google search for “down payment assistance programs” in your city.
Work with an approved lender
Once you find a down payment assistance program that looks like a good fit, you might want to find a lender that’s willing to work with you.
Credible makes it easy to find lenders in your area. You can see prequalified rates from all of our partner lenders in your area — and the process can be completed fully online. Get started on your home loan today.