A client told me last year she had been saving for a down payment for four years. Four years of skipping vacations, eating in, and putting every extra dollar in a savings account. She had about $9,000 saved for a $250,000 home.
Then I showed her a down payment assistance program in her state that would give her $10,000 as a forgivable grant. Ten thousand dollars. Free. No repayment required as long as she stayed in the home for five years.
She cried. Not because she was sad. Because she had been struggling for four years and the help was there the whole time.
This story happens more than you would think. According to a study by the Urban Institute, over 80% of renters overestimate the amount needed for a down payment, and the vast majority have never heard of down payment assistance programs. There are over 2,000 DPA programs across the country, and most of them are underutilized.
Let us fix that.
What Is Down Payment Assistance?
Down payment assistance (DPA) is financial help from government agencies, nonprofits, or employers that covers some or all of a homebuyer's down payment and sometimes closing costs. These programs are specifically designed to help people who can afford monthly mortgage payments but struggle to save a large lump sum upfront.
DPA is not charity. It is a policy tool. Federal, state, and local governments use these programs because homeownership builds wealth, stabilizes neighborhoods, and strengthens tax bases. They want you to buy a home. They are willing to pay to help you do it.
Types of Down Payment Assistance Programs
Not all DPA is created equal. Here are the main types:
1. Grants
Grants are free money that does not have to be repaid. Many state and local housing agencies offer grants ranging from $5,000 to $25,000 or more. Some are flat dollar amounts, others are a percentage of the purchase price (typically 3-5%).
- No repayment required
- May have residency or stay requirements (3-5 years typical)
- Often income-restricted (typically 80-120% of area median income)
- Example: Many state Housing Finance Agencies offer first-time buyer grants
2. Forgivable Loans (Second Mortgages)
Forgivable loans are recorded as a second mortgage but are forgiven over time, usually 5-10 years. If you stay in the home for the required period, the balance drops to zero. If you sell or refinance before the forgiveness period ends, you may need to repay a prorated portion.
- Recorded as a lien on the property
- No monthly payments during forgiveness period
- Forgiven if you stay in the home for the specified term
- Example: Many city and county programs offer forgivable second mortgages
3. Deferred-Payment Loans
Deferred-payment loans require no monthly payments but must be repaid when you sell, refinance, or pay off your first mortgage. These are sometimes called "silent seconds" because they sit quietly behind your primary mortgage.
- No monthly payments
- Repaid at sale, refinance, or payoff of first mortgage
- Some are zero-interest, others carry low interest
- Good for buyers who need help now but expect higher income later
4. Matched Savings Programs (IDAs)
Individual Development Accounts (IDAs) match your savings dollar for dollar or more. You save a set amount each month into a special account, and the program matches your contributions, often 2:1 or 3:1, up to a cap.
- Requires commitment to save for 6-24 months
- Match ratios typically 1:1 to 3:1
- Often combined with homebuyer education courses
- Best for buyers who are 1-2 years away from purchasing
DPA Program Comparison
Who Qualifies for Down Payment Assistance?
Eligibility varies by program, but most DPA programs share common requirements:
Income limits. Most programs cap household income at 80-120% of the area median income (AMI). In a metro area with a median income of $75,000, you might qualify if your household earns up to $90,000. Some programs have higher limits for high-cost areas.
First-time buyer status. Many (but not all) programs require you to be a first-time homebuyer, which HUD defines as someone who has not owned a home in the past three years.
Homebuyer education. Most programs require completion of a HUD-approved homebuyer education course. These are typically free or low-cost and available online or in person. HUD maintains a list of approved counseling agencies at hud.gov.
Property requirements. The home must be your primary residence (not an investment property). Some programs have purchase price caps or are limited to specific geographic areas.
Loan type compatibility. Many DPA programs work with FHA, VA, conventional, and USDA loans. Some are designed specifically to pair with certain loan types.
The FHA + DPA Combo: A Powerful Strategy
One of the most effective strategies for first-time buyers is combining an FHA loan with a down payment assistance program. Here is why this works so well:
FHA loans require just 3.5% down. On a $300,000 home, that is $10,500. Many DPA programs offer $10,000-$15,000 in assistance. That covers your entire down payment and potentially some closing costs.
According to HUD data, FHA loans account for roughly 30% of all home purchase loans for first-time buyers, and a significant percentage of those use some form of down payment assistance. The FHA is designed to work alongside these programs, making them a natural pairing.
The result? You could potentially buy a home with little to no money out of pocket for the down payment. You still need some savings for closing costs, inspections, and reserves, but the largest barrier to homeownership is significantly reduced.
How to Find Down Payment Assistance in Your State
Here is a step-by-step process to locate programs you qualify for:
- Start with your state Housing Finance Agency (HFA). Every state has one. Search "[your state] housing finance agency down payment assistance" and you will find their programs listed with eligibility requirements and application steps.
- Check HUD's local resources. Visit HUD.gov and search for homebuyer assistance programs in your area. HUD maintains a database of local programs organized by state and city.
- Ask your city and county housing departments. Many municipalities run their own DPA programs that are not listed on state websites. Call your city or county housing office directly.
- Look into employer programs. Some employers, particularly large companies, hospitals, and universities, offer homebuyer assistance as an employee benefit. Check with your HR department.
- Talk to a mortgage broker who knows DPA. This is where CMS Mortgage becomes a real advantage. As a Top 50 National Brokerage working with 50+ lenders across the country, we know which DPA programs pair with which loan products in your area. We have helped thousands of buyers access assistance they did not know existed.
- Complete a HUD-approved homebuyer education course. Even if you are not sure which program you will use, completing this course makes you eligible for nearly all DPA programs. It also teaches you valuable information about the buying process.
How to Apply for Down Payment Assistance
- Research programs in your area. Use the steps above to identify 2-3 programs you may qualify for.
- Verify your eligibility. Check income limits, first-time buyer requirements, and property restrictions for each program.
- Complete homebuyer education. Most programs require this before or during the application process. HUD-approved courses are available online and typically take 4-8 hours.
- Get pre-approved for your primary mortgage. Your lender needs to confirm that the DPA program works with your loan type. Get pre-approved with CMS Mortgage and we will identify compatible DPA programs for you.
- Submit your DPA application. This is typically done in coordination with your mortgage application. Your loan officer can often handle both processes simultaneously.
- Close on your home. The DPA funds are applied at closing, reducing or eliminating your out-of-pocket down payment requirement.
Common DPA Myths
"DPA is only for low-income buyers." Not true. Many programs serve moderate-income households earning up to 120% of the area median income. In higher-cost areas, this can mean households earning $100,000 or more.
"The application process is too complicated." Most DPA applications are straightforward and are processed alongside your mortgage application. Your loan officer handles the coordination.
"There is not enough funding." While some programs do run out of funds, many are replenished annually. Applying early in the fiscal year (often July or October) improves your chances, but funds are available year-round in most programs.
"DPA programs have terrible terms." Many DPA programs are grants or forgivable loans. There is literally no downside if you plan to stay in the home for the required period.
How CMS Mortgage Connects You With DPA
We do not just know about these programs. We use them regularly. Our loan officers are trained to identify DPA programs that match your profile, pair them with the right loan product, and manage the application process from start to finish.
With over 20 years of experience and 50+ lending partners, CMS Mortgage has the relationships and the knowledge to find money you did not know was available.
Start your pre-approval today and ask about down payment assistance in your area. You might be surprised how close you already are to owning a home.
Frequently Asked Questions
How much down payment assistance can I get?
The amount varies by program, but most DPA programs offer between $5,000 and $25,000. Some programs provide a percentage of the purchase price (typically 3-5%) rather than a flat dollar amount. In high-cost areas, some programs offer more. The exact amount depends on your state, city, income level, and the specific program.
Do I have to pay back down payment assistance?
It depends on the program type. Grants do not require repayment. Forgivable loans are forgiven if you stay in the home for a set period (usually 5-10 years). Deferred-payment loans must be repaid when you sell, refinance, or pay off your mortgage. Each program has different terms, so read the details carefully.
Can I use down payment assistance with an FHA loan?
Yes. FHA loans are one of the most common loan types paired with down payment assistance. The FHA allows DPA from government agencies and approved nonprofits to cover your 3.5% down payment. Many DPA programs are specifically designed to work with FHA financing.
Do I have to be a first-time homebuyer to get DPA?
Many DPA programs require first-time buyer status (defined as not owning a home in the past three years), but not all. Some programs are available to repeat buyers, particularly in targeted areas or for buyers who meet income requirements. Veterans using VA loans may also have additional options regardless of buyer status.
How do I find down payment assistance programs in my state?
Start with your state's Housing Finance Agency website, then check HUD.gov for local programs. Your city and county housing departments may have additional programs. The most efficient approach is to work with a mortgage broker like CMS Mortgage who knows the DPA landscape and can match you with programs you qualify for. Contact us and we will do the research for you.
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This content is for educational purposes and does not constitute financial advice. DPA program availability, terms, and eligibility requirements change frequently. Consult with a licensed mortgage professional before making decisions. Connect with CMS Mortgage to explore your options.