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Dan Green

Dan Green

Since 2003, Dan Green has been a leading mortgage lender and respected industry authority. His unwavering commitment to first-time home buyers and home buyer education has established him as a trusted voice among his colleagues, his peers, and the media. Dan founded Homebuyer.com to expand the American Dream of Homeownership to all who want it. .

Family Standing In Front Of Their New Home That They Purchase Using Down Payment Assistance

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What Is Down Payment Assistance?

Down payment assistance is any program that gives eligible home buyers cash grants, low-interest rate mortgage loans, or tax incentives to help purchase a home.

A Longer Definition: Down Payment Assistance

Down payment assistance is when a government agency, community organization, or mortgage company gives a first-time home buyer cash grants, lower mortgage rates, or tax incentives to purchase their first home.

There are more than 3,000 down payment assistance programs nationwide. Common downpayment assistance types include:

  • Cash grants for making a down payment on a home
  • Closing cost credits for paying discount points and closing costs
  • Discounted mortgage rates for eligible buyers
  • Forgivable loans for making down payment on a home
  • Federal, state, and local tax credits and deductions

The roots of down payment assistance are in the social and economic good of homeownership.

Studies show that when people become homeowners, life outcomes improve, and local communities benefit. Civic engagement rises, household wealth grows, and children are more likely to finish high school.

Homeowners also spend money with local businesses which generates tax revenue for municipalities and social services.

5 Types of Down Payment Assistance

Home buyers may be eligible for up to 5 types of down payment assistance. Programs can be stacked for larger gains, when eligible.  

Cash Grants For A Down Payment

The majority of down payment assistance programs are cash grant programs.

Cash grants are awards that don’t require repayment. However, many cash grant programs feature a 5-year clause that requires buyers to live in their new home for five years at minimum or repay the grant to the issuing entity in part or whole.

One example of a cash grant program is the proposed Downpayment Toward Equity Act, which gives first-time home buyers up to $25,000 cash for down payment, closing costs, and other related costs.

Read more about the Downpayment Toward Equity Act.

Closing Cost Credits

Closing cost credits are cash grants given to a home buyer at closing to pay their settlement fees, which may include mortgage discount points, real estate taxes, fees for title, and other costs.

The most common form of closing cost credit is seller concessions, which are grants issued from a home seller to a buyer. Seller concessions range up to 6 percent of your purchase price, and your buyer’s agent can add them to your purchase contract.

Read more about seller concessions.

Discounted Mortgage Rates

Another down payment assistance type awards lower mortgage rates, which reduces monthly PITI, and makes homes more affordable for first-time buyers.

When state and local governments and community groups offer discounted mortgage rate programs, they usually pay discount points on a buyer’s behalf, which reduces mortgage rates by 25 basis points per discount point paid in a healthy housing market.

At today’s mortgage rates, one discount point saves $11,776 over the life of $200,000 30-year mortgage.

The FHFA First-Time Home Buyer Mortgage Rate Discount is an example of a federal mortgage rate discount program. Since 2022, it awards automatic mortgage rate discounts to eligible first-time buyers.

Read more about the FHFA First-Time Home Buyer Mortgage Rate Discount.

Forgivable Mortgages

Forgivable mortgages are a form of down payment assistance where a portion or all of a home buyer’s mortgage debt is erased once the buyer meets pre-defined conditions, such as living in the home for five years or maintaining five years of continuous employment within an eligible field.

Forgivable mortgages generally accompany FHA mortgages or conventional mortgages and represent the down payment portion of a home buyer’s purchase.

The Conventional 100 is a forgivable mortgage.

Property Tax Credits

Property tax credits and property tax reductions are another type of down payment assistance, offered by local and municipal governments, in specially-designated neighborhoods and census tracts. Buyers in affected areas receive temporary property tax relief, which lowers monthly payments for up to 10 years.

Mortgage Credit Certificates (MCC) are a form of property tax credit. States may charge home buyers as much as $750 to apply for an MCC. Awards range up to $2,000 after claiming taxes paid with the Internal Revenue Service.

Down Payment Assistance: A Real World Example

First-Time Home Buyer Stories: Homeowners Association

Imagine an aspiring first-time home buyer who works as a travel nurse and diligently saves money from each payment to someday own a home. Over the last three years, though, as the nurse’s down payment fund grew, so did the price of homes in their area. No matter how much they work, they can’t seem to save enough money to make their desired 3 percent downpayment.

Then, the nurse discovers down payment assistance programs. They can get a cash grant to boost their down payment, a federal tax break to save on money paid to the IRS, and seller concessions to pay for their closing costs entirely.

Instead of waiting another four years to buy, the nurse realizes they can break their lease now and buy a home today.

How To Apply For Down Payment Assistance

Downpayment assistance programs can be categorized as applied automatically, or manually.

Federal down payment assistance programs are often automatic, with no application. They include:

  • First-time home buyer tax credits
  • The FHFA First-Time Home Buyer Mortgage Rate Discount program
  • Property tax abatements

Apply for a mortgage now.

Other down payment assistance programs, specifically those administered by state and local governments and charitable groups, are processed manually, which means buyers must apply for assistance directly.

The U.S. Department of Housing & Urban Development (HUD) provides links to local programs on its website, grouped by state, county, and city. Before applying, review your preferred program’s terms and conditions to ensure they meet goals. Some programs enforce a 5-year residency and others will require that you remain employed in a particular line of work.

Manual assistance programs may add months to your home purchase sequence so apply in advance.

Graphic: The Median Down Payment Of A First-Time Home Buyer Is 6 Percent

Common Questions About Down Payment Assistance Programs

Does Homebuyer.com offer down payment assistance to first-time home buyers?

Yes, Homebuyer.com offers several down payment programs for first-time buyers, including the Conventional 100 mortgage and a $5,000 cash grant program through our partner bank. We do not offer down payment assistance for mortgages funded by other mortgage lenders.

To apply for a mortgage with Homebuyer.com, visit our immediate approval application.

Can anyone apply for down payment assistance?

Down payment assistance programs are generally meant for first-time home buyers. However, each program’s guidelines are different so repeat buyers may be eligible.

How much assistance can I get from a Downpayment Assistance Program?

The amount of down amount assistance will vary by program. Some DPAs give the buyer a percentage of the home’s purchase price, such as with seller concessions and forgivable loans. Others provide a fixed amount of home buyer assistance.

Do I have to repay down payment assistance money?

Whether you must pay back down payment assistance depends on the program. By definition, a grant or tax credit never needs repayment, and forgivable mortgages are repayable only when certain conditions cannot be met.

Do down payment assistance programs require a homebuyer education course?

Many down payment assistance programs require that buyers attend a homebuyer education course to ensure they’re well-informed about homeownership responsibilities and financial management.

What happens if I sell my home shortly after using down payment assistance?

Many downpayment assistance programs contain a “recapture” clause. If you sell your home within a certain period after purchase, you may have to repay some or all of the assistance received.

How do I find Downpayment Assistance Programs available in my area?

There is no centralized database for down payment assistance programs, so you should start by checking with local housing authorities, state housing finance agencies, and non-profit organizations specializing in housing assistance.


This article, "What Is Down Payment Assistance?" draws on the author's professional mortgage experiences and references information found at these authoritative websites:


  • January 26, 2024: Removed copy and sections that didn't address the subject; Improved program description clarity; Replaced chart; Added FAQ for first-time home buyer
  • May 16, 2022: Original publish date

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       Down payment assistance is any program that gives eligible home buyers cash grants, low-interest rate mortgage loans, or tax incentives to purchase a home.

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