If you aspire to become a homeowner but lack sufficient funds for a down payment, consider exploring state or local down payment assistance programs. Numerous states, counties, and cities provide grants and no-interest loans to support home buyers in covering down payments and closing costs.

How payment assistance programs work

Assistance is provided through state housing finance agencies, as well as cities, counties, nonprofits, and even certain employers. These programs are frequently offered alongside mortgages tailored for first-time homebuyers.

The specific types of closing cost and down payment assistance offered can vary depending on the program. Common forms of assistance include:

• Grants. Certain programs offer a direct monetary gift.
• Zero-interest, forgivable loans. The loans are forgiven after a specified duration, typically five years. Repayment is not required as long as the borrower maintains ownership and residence in the home beyond the designated period.
• Zero-interest, deferred-payment loans.The terms and conditions may differ, but typically, there is no requirement to make payments on the down-payment and closing-costs loan until the home is sold, the mortgage is refinanced, or the mortgage reaches the end of its term.
• Low-interest loans. Homeownership becomes more achievable through loans that allow spreading the down payment and closing costs over several years. Repayment is typically scheduled over a fixed period, such as 10 years. This approach not only facilitates the process but also enhances affordability for aspiring homeowners.

Who is eligible for down payment assistance?

Most down payment assistance programs primarily target first-time home buyers. However, it’s worth noting that a significant portion, around 38%, of homeownership programs are also available to eligible repeat buyers. This information comes from Down Payment Resource, a company that monitors over 2,000 such programs, including those that provide assistance with down payments or closing costs.

Don’t rule yourself out of a program just because it requires first-time home buyer status. Even if you’ve owned a home before, you may still be eligible. Generally, these programs consider someone a first-time buyer if they haven’t owned a home in the past three years. Additionally, there are local programs that specifically cater to certain groups, such as teachers, police officers, emergency responders, or city employees.

Down payment assistance program requirements may vary, but typically, certain conditions must be met, such as:

• Take a home-buyer education course.
• Meet income limits. Many programs are geared to low- and moderate-income residents, so a borrower’s household income must be below a certain threshold.
• Purchase in an approved location.
• Stay below the maximum home purchase price, which is usually a percentage of an area’s median home purchase price.
• Contribute some of your own money toward the purchase.

Finding Down Payment Assistance Programs

You can explore various resources to find programs, such as:

• Your city and county governments. Numerous cities and counties provide programs, including down payment assistance, to support and enhance homeownership opportunities.
• The U.S. Department of Housing and Urban Development. To explore the available homebuying programs in your area, you can visit HUD’s website and navigate to the local homebuying programs page. Once there, simply select your state from the options provided, and you’ll be presented with a comprehensive list of programs tailored to your location.
• HUD-approved housing counselors. The Consumer Financial Protection Bureau provides a valuable resource for locating a housing counselor in your local area.

Applying for Mortgage Down Payment Assistance

To learn about the down payment assistance requirements and access a list of approved mortgage lenders, it is recommended to visit the website of the local government agency or organization responsible for administering the program. When applying for a mortgage, it is important to choose a lender who is approved to work with the grant program. Local agencies may also be able to provide recommendations for loan officers with expertise in assisting applicants with the grants they administer.

Contact Sword Mortgage To Learn More About Your Options

Call (770) 757-5750 or complete our online form to speak with a loan expert at Sword Mortgage to get help navigating your options and find a loan that fits your needs today.