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What kinds of help exist
| Type | How it works | Watch for |
|---|---|---|
| Grants | Money you don’t repay | Often small; may require income limits or homebuyer education |
| Forgivable second loans | Forgiven over a set period if you stay | Repayment if you sell or refinance early |
| Deferred (“silent”) second loans | Loans with payment deferred until a specified event; interest and repayment triggers vary | Reduces your equity later |
| Low-interest second loans | Repaid monthly | Adds to your monthly payment |
| Below-market first mortgages | HFA mortgages with reduced rates | Compare against open-market rates |
| Mortgage Credit Certificates (MCC) | Federal tax credit for part of mortgage interest paid each year | Recapture tax possible if you sell within nine years with higher income |
| Employer and lender programs | Employer-assisted housing; lender closing cost credits | Tied to employment or specific lenders |
| Shared-equity and community land trusts | Lower purchase price in exchange for sharing appreciation or resale restrictions | Limits on resale profit |
| Habitat for Humanity | Affordable mortgage plus sweat equity | Waitlists and application windows. See Habitat and sweat equity |
Where to look
- Your state housing finance agency (HFA): the largest source of down payment help and first-time buyer mortgages. Find it through the National Council of State Housing Agencies.
- City and county housing departments: programs funded by HOME, CDBG, and local funds, often for specific neighborhoods or income levels.
- HUD-approved housing counselors: know local programs and can certify homebuyer education.
- Lenders approved for HFA programs: can tell you which programs you qualify for.
- Employers, unions, and universities: some offer homebuyer benefits.
- Programs for specific groups: veterans (VA loans), rural buyers (USDA), Native American buyers (Section 184), public servants (HUD’s Good Neighbor Next Door, see HUD homes).
Common eligibility rules
- First-time buyer (no ownership in three years), with exceptions
- Income limits (often 80% to 120% of area median income, sometimes higher)
- Purchase price limits
- Homebuyer education course completion
- Minimum credit score and debt-to-income limits
- Owner-occupancy for a required period
- Minimum personal contribution (for example, $1,000 or 1% of the price)
A safe step-by-step plan
- Set your budget first. Calculate a comfortable total monthly housing cost, including taxes, insurance, HOA dues, utilities, and repairs. See the true cost of homeownership.
- Check and improve credit. Get free reports at AnnualCreditReport.com and fix errors.
- Take homebuyer education from a HUD-approved agency.
- Research assistance programs and their rules.
- Get pre-approved with a lender that participates in the programs you want.
- Shop for a home within your budget, not the maximum approval.
- Get an independent home inspection.
- Review the Closing Disclosure three business days before closing and compare it with your Loan Estimate.
- Keep an emergency fund after closing.
Questions to ask about any assistance
- Is it a grant or a loan? If a loan, what’s the interest rate and when is it due?
- Is it forgiven? Over what period and on what conditions?
- What happens if I sell, refinance, or rent the home?
- Can I combine it with other programs?
- Does it limit my loan type, lender, or home price?
- How long does approval take, and can it delay closing?
Avoid pitfalls
- Don’t let assistance stretch you into a home you can’t afford monthly.
- Watch for high-cost loans marketed as “zero down” without clear terms.
- Don’t skip the home inspection to make an offer more competitive.
- Be cautious of rent-to-own or contract-for-deed deals. See rent-to-own and contract for deed.
Frequently asked questions
Who counts as a first-time homebuyer?
For most programs, someone who hasn’t owned a principal residence in the past three years. Many programs also include single parents or displaced homemakers who only owned with a former spouse, and some waive the rule for veterans or in targeted areas.
Is there a federal first-time homebuyer grant?
There’s no general federal cash grant for all first-time buyers. Federal programs like FHA, VA, and USDA lower the down payment requirement, and federal HOME and CDBG funds pay for many local down payment programs. Be skeptical of ads for a “$25,000 federal grant.”
What’s the difference between a grant and a forgivable loan?
A grant generally does not need repayment if you meet its conditions; some assistance has occupancy or resale recapture terms. A forgivable loan is recorded as a lien and is forgiven over time (for example, 20% per year over five years) if you stay in the home; if you sell, refinance, or move out early, you may owe some or all of it. Deferred loans are repaid when you sell, refinance, or pay off the first mortgage.
Can I use down payment assistance with an FHA loan?
Often yes. Many state and local programs pair with FHA, VA, USDA, or conventional loans, but each program specifies which loan types and lenders it allows.
Sources and verification
Use these sources to check program rules. Funding, openings, and local procedures must be confirmed with the agency handling your application.
Update note (2026-10-01): Clarified grant conditions, recapture, and deferred-loan repayment terms; updated the HOME program reference.
- Buying a home: Programs and assistanceUSAGov
- Find a housing counselorU.S. Department of Housing and Urban Development
- State housing finance agenciesNational Council of State Housing Agencies
- Your home loan toolkitConsumer Financial Protection Bureau
- HOME Investment Partnerships ProgramU.S. Department of Housing and Urban Development
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