- Compiled with AI Assistance by David Barton
Introduction
Buying a home often includes one major hurdle: saving for the down payment. Down Payment Assistance (DPA) programs aim to bridge that gap. These initiatives, offered by government agencies, nonprofits, or lenders, help eligible buyers with cash grants, low- or no-interest loans, or other incentives to make homeownership more accessible.
1. Types of Down Payment Assistance
- Cash Grants: These no‑repayment funds can cover your down payment or closing costs. Some grants require you to stay in the home for several years or repay a portion if you move early.
- Forgivable Loans / Soft Seconds: These are second mortgages with zero interest, which may be forgiven after a set period if you continue living in the home.
- Deferred or Second Mortgage Loans: These loans may carry low or no interest and require payment only upon refinance or sale.
- Lender-Provided Programs: Banks occasionally offer DPA programs or savings matches—but typically require you to use their mortgage services.
2. Who Qualifies? Eligibility Criteria
Most programs are geared toward first-time buyers, typically defined as anyone who hasn’t owned a home in the past three years, as well as buyers of principal residences (not investments).
Additional common requirements include:
- Income limits based on area median income (AMI)
- Location-based eligibility, set by city or county.
- Homebuyer education courses, often required before funding.
- Minimum credit score, often around 620.
3. Why It Matters
- Bridges the affordability gap: Especially vital for buyers without substantial savings or family support. In 2024 one-fourth of first-time buyers relied on assistance from programs, nonprofits, or family.
- Stacking opportunities: You can often combine multiple assistance sources for a bigger impact (for example, combining state grants with lender programs).
- Good long-term support: Many programs increase affordability and long-term home retention by deferring—or forgiving—repayment.
4. Real-World Example:
- Utah: Through the Utah Housing Corporation (UHC), buyers may access DPA loans that require no mortgage insurance—improving payment affordability.
5. Getting Started
Step Actions:
- Explore programs via your state's Housing Finance Agency, city or county websites, downpaymentresource.com, or connect with your lender or real estate agent.
- Take required homebuyer education to qualify for funds
- Apply early—many programs have limited funding or operate on a first-come basis.
- Stack assistance where allowed, to potentially cover both down payment and closing costs.
Conclusion
Down payment assistance programs are powerful tools for helping buyers overcome upfront financial challenges. Whether you're a first-time buyer or exploring mortgage options, linking to local DPA programs—alongside services like homebuyer education—can significantly support your clients on the path to homeownership.