Down Payment Assistance: How to Get Help Buying a House

Buying a home with a mortgage loan generally requires you to make a down payment as part of the loan terms. Most experts recommend you make at least a 20% down payment on your home purchase to build equity and avoid paying for extra mortgage insurance. The problem is, a down payment is a large sum of money that many people have trouble affording.

A 2017 study from the Urban Institute found that 68% of renters said saving for a down payment was an obstacle to owning a home. Furthermore, the average down payment for first time home buyers is just 6% — well below the recommended amount.

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To make home ownership more affordable, down payment assistance is available in a variety of forms. Take, for example, down payment assistance programs, which are designed to help people buy homes. These programs are available through various governments and organizations at local, state and federal levels. If you’re looking for help with your down payment, you may be able to find a program or assistance to help. Here’s what you need to know.

In this article

    What is down payment assistance?

    Down payment assistance is a term used to describe a range of programs that help you buy a home. These programs include grants, loans and even tax credits. Which programs are available to you is highly dependent on location and other qualifications and requirements.

    Many down payment assistance programs are tied to target areas, which are places the U.S. Department of Housing and Urban Development (HUD) has determined to have housing markets that are highly challenged.

    Some of the other down payment assistance programs are tied to employment. These programs are for people who work in specific industries, such as healthcare or education. For example, the Texas State Affordable Housing Corporation offers a program for Texas teachers called the Homes for Texas Heroes Home Loan Program.

    [ Read: 7 Crucial Steps to Buying a Home

    There are other programs in place, too. Some nonprofit organizations or community groups offer these types of assistance programs, but it will depend heavily on the county or city you live in.

    Although each program is different, down payment assistance usually comes in the form of a grant or a loan. A grant is money given to you with no repayment requirement, as long as you continue to meet the milestones or requirements of the program.

    On the other hand, you must pay back a loan, but the loans offered by these programs commonly include terms that are much more favorable to borrowers than other loan terms.

    Some programs also offer tax credits to offset the cost of taxes during the home buying process, which can be substantial. The specificities of the help you’ll receive will depend on the specific program you qualify for.

    Who qualifies for down payment assistance?

    Because these programs vary and are offered by many different organizations and governments, there’s no set of requirements that holds true for all the programs.

    That said, down payment assistance programs are generally geared toward first-time or lower-income home buyers.

    [ More: 10 Tips for First-Time Home Buyers ]

    As the home buyer, you’ll need to meet the criteria laid out in the program requirements, including what the planned use of the home will be.

    Nearly all down payment assistance programs are for owner-occupant buyers. That means you’ll need to live in the home to qualify. Investment properties are generally barred from down payment assistance.

    Aside from the home’s use, these programs can target specific demographics, such as low- or moderate-income families. Jobs that focus on public good — such as healthcare, government employment, first responders and teachers — are also eligible for down payment assistance through occupation-specific programs.

    However, many down payment assistance programs are governed by zip codes. The biggest factor to determine the kind of assistance you can receive is generally your location. If you’re looking for a program to help with home buying, your best bet is to first look for a program that targets your zip code.

    How to get down payment assistance 

    The first step to getting down payment assistance is taking a personal inventory. If your income is high or you’ve purchased a home recently, chances are you won’t qualify for down payment assistance through most programs.

    If you genuinely need help getting a mortgage loan, many down payment assistance programs are handled by state governments, so you may want to look for programs at the state level first.

    A good place to start is your state’s housing finance agency. These agencies are designed to help people find housin, and they offer many different state-specific programs. The National Council of State Housing Agencies provides a comprehensive list of agencies by state.

    [ See: Nine Secrets of Successful Homebuyers ]

    If you are employed as a police officer, firefighter, teacher, doctor, nurse or social worker, you might qualify for the Everyday Hero Housing Assistance Fund, which is funded by the Virtual Sports Academy. This program is available in all states except New York and Vermont.

    One of the largest organizations to fund down payment assistance is HUD. For more general information on down payment assistance, HUD’s website offers lots of helpful links to guide you through the process. It’s important to note that HUD does not offer down payment assistance directly — the organization uses partners to distribute the funds.

    One of the main HUD-funded programs is the American Dream Downpayment Fund, which caters to low-income families. If you’re a first-time home buyer with an income that’s 80% below the median in your area, then you might be eligible.

    Tips on down payments and programs

    Applying for down payment assistance is an involved process that takes time. Here are a few tips to help you along the way:

    • Research your area. Many down payment assistance programs are location-specific. If you live in a region that HUD has labeled as a “low-income housing tax credit qualified census tract” or a “difficult development area,” then a program is probably offered in your area. To find out if you live in one of these areas, check out the map from the Office of Policy Development and Research.
    • Look into first-time homebuyer requirements. You might still be eligible for some first-time homebuyer programs, even if you’ve purchased a house prior to this purchase. HUD defines first-time homebuyers as someone who hasn’t owned a home in the last three years. You still might even be eligible if you have owned a home more recently, but it will depend on your circumstances.
    • Check your eligibility first. Applying to these programs takes a lot of time and effort on your part, so it’s best to check the eligibility requirements before applying. Doing so will save you the hassle of going through the process only to get rejected for something like living in the wrong zip code.
    • Ask lots of questions. Down payment assistance usually requires lots of phone calls and paperwork. It’s easy to get lost in the details. If you have any questions, make sure to contact the organization right away. Most organizations are more than happy to help answer your questions.

    We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

    Julian Dossett

    Contributing Writer

    Julian writes about what’s coming next, covering stories from artificial intelligence to cryptocurrency. He lives with his wife in Albuquerque, New Mexico. Whenever he has a day off, Julian can be found at Isotopes Stadium watching the ballgame.

    Reviewed by

    • Angelica Leicht
      Angelica Leicht
      Mortgage Editor

      Angelica Leicht is an editor at The Simple Dollar who specializes in mortgages, mortgage refinancing, home equity loans, and HELOCs. She is a former contributing editor to Interest.com and PersonalLoans.org.