Down payment assistance programs: how they work and how to find yours

Every state housing finance agency and hundreds of cities, counties and employers offer down payment help. The money is real; the catch is that each program has its own structure, limits and lender list.

The four structures

Grants: money you never repay (Oklahoma, Virginia and several others use this form). Often paired with a slightly higher first-mortgage rate.
Forgivable second loans: a 0% lien forgiven after you occupy the home for a set period (commonly 3 to 15 years); sell or refinance early and you repay some or all (Florida, Illinois, New Jersey, Ohio).
Deferred second loans: 0% with no monthly payment, repaid in full when you sell, refinance or pay off the first loan (California, Michigan, Texas, Georgia).
Repayable second loans: amortizing loans at a low rate, repaid monthly over 10 to 30 years (Kentucky, Pennsylvania’s Keystone Advantage, New Mexico).

A fifth tool, the Mortgage Credit Certificate (MCC), is not cash at closing but a federal tax credit worth 10% to 50% of your annual mortgage interest (capped at $2,000 a year) for the life of the loan — offered in about half the states.

Who qualifies

Typical requirements: household income below a limit (often 80% to 120% of area median income, varying by county), a purchase price below a cap, a minimum credit score of 620 to 660, a homebuyer education course, and occupancy as a primary residence. “First-time buyer” usually means you have not owned a primary residence in the past three years — so previous owners often qualify — and it is waived in targeted areas and for veterans in many programs.

How the money flows

Assistance is almost always delivered through a participating lender who originates the first mortgage; you do not apply to the state directly. The assistance funds the down payment and sometimes closing costs at the settlement table. Not every lender is approved for every program, which is the main reason eligible buyers miss out: ask “Are you approved for the state HFA program?” before you pick a lender.

Stacking

Many programs layer: a state second mortgage plus a city grant plus an employer benefit plus a family gift, on top of a 3% down HomeReady or FHA first mortgage. Conventional and FHA both allow the entire down payment to come from these sources on a one-unit primary residence.

Find your state

Our state pages summarize each state agency’s programs, assistance amounts, MCC availability, transfer taxes and typical closing costs. Program details change yearly — confirm current terms with the agency.

Frequently asked questions

Does down payment assistance raise my interest rate?

Often slightly — programs fund grants partly through a higher first-mortgage rate. Compare the all-in monthly payment with and without assistance; for buyers short on cash, the assisted loan usually still wins because it makes the purchase possible at all.

Do I have to pay it back if I sell?

Depends on the structure: grants, no; forgivable loans, only within the forgiveness period; deferred loans, yes, in full from the sale proceeds; repayable loans, the remaining balance.

Can I combine DPA with an FHA loan?

Yes, in most states. FHA allows secondary financing from government agencies and approved nonprofits for the entire down payment.