Down Payment Assistance

First-time homebuyers face a lot of obstacles in their quest to become property owners, and coming up with a hefty down payment is often one of the largest. Many traditional lenders require as much as 10% down, which translates into tens of thousands of dollars on even the most modestly priced home. Ten years ago, lenders were offering interest-only, no money-down loans with no required income verification to anyone who was willing to sign the paperwork. This significantly lowered the barrier to homeownership but created massive problems along the way. Those days are gone, so new buyers must be more creative and disciplined in their search for financing.

Fortunately, there’s help available. Federal and state governments have stepped in and now offer many programs designed to help first-time homebuyers make their down payments. Here’s a quick primer on a few of the available programs:

Banker

FHA Loans
The Federal Housing Authority (FHA) through the US Department of Housing and Urban Development (HUD) has administered home loans since 1934. FHA loans offer easy credit qualifying terms, low down payment rates (as low as 3.5%), and reduced closing costs. It’s important to remember that not every mortgage broker is an approved FHA lender, but fortunately HUD has compiled a comprehensive lender database to help in your search.

In addition to low-cost loans, HUD offers special lending programs for certain career types (police officer, teacher, firefighter), those currently living in public housing and for American Indians.

Military Home Loans
If you’re an active duty service member, Veteran, or a surviving spouse, the US Department of Veteran Affairs offers several programs to help purchase a home, often without down payment or mortgage insurance requirements. Click here to check your eligibility.

Secondary Financing Providers
In conjunction with an FHA loan, many buyers can find separate financing for down payment and related closing costs. The Down Payment Assistance Through Secondary Financing Providers (DAP) program connects buyers with HUD approved lenders. Click through to the DAP Portal for more information.

Grants
It may be possible, depending on certain factors, to qualify for a no-strings-attached grant to help cover the cost of your down payment. Many state housing authorities administer these programs, so visiting your own state’s housing authority website is a great place to start. For more information, this site offers a great collection of links on home ownership grants throughout the country.

Get Help from the Professionals
If this all sounds too overwhelming to tackle on your own, it’s smart to seek help from qualified Realtors and lenders. Their experience and advice will be invaluable as you search for your first home and shop for financing.

And if you need more information on down payment assistance programs, Down Payment Resource (DPR) offers a down payment assistance program finder that can help determine your eligibility for many of these available programs.

So if the thought of saving for a huge down payment is standing in the way of homeownership, take heart, because help is available.