Downpayment assistance can be critical to a homebuyer. Helping buyers by providing loans and grants, these programs reduce the total amount someone needs to enter or restart homeownership.
There are thousands of these programs across the country. There are federal programs, state-sponsored programs, and assistance offered by counties and cities. There are private organizations, non-profits, and businesses that provide support.
They vary by location, by size, by availability. There is plenty of support available, but navigating these options and finding the right one for your needs can be difficult.
With that in mind, we’ve created this handy guide to finding the right assistance in your state.
Downpayment Assistance: How to Find Support in Your State
There are loans and even grants (gifts, essentially) that can help you purchase a house. Low-interest loans and grants can significantly reduce the amount you need for a home purchase and make it far easier to buy a home.
If you qualify, you can receive thousands of dollars (which may or may not need to be repaid) so you can make the purchase. These assistance programs can cover anything from your downpayment to the closing costs.
Most downpayment assistance programs (DPAs) are available at the local level and eligibility requirements change significantly from one home to another.
Some programs, for example, require that you are a first-time homebuyer. Others have no such requirement, but do require that your income is below a certain level. Usually, you income is compared to the area’s median income, or “AMI.” Some require that you have a certain credit score, while others are only available after you complete homeownership classes. Also, some only work with certain lenders or loan programs.
Common requirements for downpayment assistance programs include:
- First-time homebuyers
- Low or moderate incomes
- The property is a primary residence (no second homes)
- Single-family property (no multi-unit properties)
- Within local purchase-price limits
- Used in combo with an approved loan program
Again, each program will have different requirements. These are just a few of the different requirements you will find when sorting through DPA programs.
How Do I Find Downpayment Assistance in My State?
There are some national DPA programs available. There are even more state-level programs, which are available only to buyers in that specific state.
However, the vast majority are either city or county options. Tracking these down can, unfortunately, be confusing.
The best way to find downpayment assistance programs in your area is to speak with a loan officer, broker, or agent. An experience, knowledgeable agent with years of experience in the area will know which options are available in your city or county. They will know about local grants, as well as loan programs that can help secure a downpayment. They also know which programs the lending institution will allow. (Be aware that not all organizations allow all downpayment programs on their loans.)
You can, however, do some easy research on your own. A simple online search for “downpayment assistance in…” with your city, county, or state should bring at least a few reliable results.
Why Types are Available
While there are a variety of different programs available, and each one has its own unique details, there are, generally speaking, four main types of assistance.
Grants
This is a cash gift that never has to be repaid. For obvious reasons, this is the best option for DPA programs.
Loans
Usually structured as second mortgages, these are repaid monthly. You basically get a small loan to cover the downpayment, then repay the loan in small amounts over a certain period.
Deferred Loans
These are similar to the above, but instead of making payments right away, they are delayed. With most deferred downpayment loans, you only have to repay when you move out of the home, sell the property, or refinance the mortgage.
Forgivable Loans
These are initially loans, but if you meet a certain set of requirements, they can be forgiven. Usually they are forgiven after you live in the home and make steady, consistent payments for a pre-determined number of years.
Grants are probably the most common type of DPA program available. They are the most helpful, as buyers don’t have to repay, and they are offered by a variety of government and private organizations. But even if you don’t qualify for grants in your area, loans, deferred loans, and forgivable loans can be extremely useful.
Who Qualifies for Downpayment Assistance Programs?
For the most part, these programs are intended for first-time homebuyers. If you have never purchased a home in your life, you meet the initial requirement for using these programs. However, even if you have owned a home in the past, you may qualify as a “first-time buyer.” If you have not owned a home in the past three years, you likely qualify even if you are not literally a first-time homeowner.
The other common requirement is income. These programs are meant for people who struggle to generate an downpayment, usually because their income is so low they can’t save the thousands of dollars required. Income is usually compared to the typical income for your area, usually using the AMI, or Area Median Income. Most programs require DPA user be at or below the median income for a given city or county.
How Much Assistance Can I Receive?
That’s a simple question with a complex answer, an answer that largely depends on where you live. Borrowers in certain areas may qualify for nearly $100,000 in forgivable loans, while others many only have access to a couple of thousand dollars in grants. Others may only find interest-free loans.
Because the answer is so far-ranging, it’s best to look at the available options in your state.
Find the Best DPA Program in Your Area!
When you are ready to enter homeownership but are struggling with a downpayment, contact our team. We’ll help you find the right downpayment assistance programs in your area, and we’ll make sure you have an affordable loan that fits your specific needs.
