For many people, the down payment feels like the biggest hurdle to homeownership. You might assume you need tens of thousands of dollars saved before you can even start house hunting.
But you may not need to save as much as you think.
In combination with low and zero-down payment mortgage options, there are many down payment assistance programs designed to help qualified buyers overcome this exact challenge. These programs can reduce the amount of cash you need upfront, or, in some cases, cover your down payment completely. The key is understanding how down payment assistance works and how to find programs you may qualify for.
What Is Down Payment Assistance?
Down payment assistance, or DPA for short, refers to a program that provides financial help to cover some or all of the upfront costs of buying a home. DPA programs are designed to help qualified buyers overcome one of the biggest barriers to homeownership: saving enough money for a down payment.
But, contrary to the name, these programs can also typically be used to help cover closing costs, too.
How Do Down Payment Assistance Programs Work?
In most cases, assistance is applied directly at closing to help reduce the amount of money you need to bring to the table. The exact structure depends on the program.
Here are the most common types of down payment assistance programs.
Grants
Grants are the most attractive forms of assistance because they don’t require repayment.
If you qualify for a grant and meet the program requirements, such as living in the home for a certain number of years, you usually don’t have to pay the money back. Grants are often offered by state housing agencies, local governments, some banks or nonprofit organizations.
Some down payment assistance grants also use a matching system where the grantor will match your down payment up to a certain amount. So, if you have $7,500 for your down payment, you could receive an additional $7,500, making your total down payment $15,000.
Forgivable Loans
Some assistance programs provide funds as a forgivable loan. With a forgivable loan, the balance is gradually forgiven over a set period of time. For instance, a program may forgive 20% of the loan each year for five years. If you remain in the home for the full period, the loan is completely forgiven.
Deferred Loans
Deferred loans work a little differently. Instead of monthly payments, the loan is repaid when certain events occur, such as:
Selling the home
Refinancing the mortgage
Paying off the primary mortgage
These structures can make it easier to buy a home now without adding immediate monthly payments.
Low-Interest Loans
Some down payment assistance programs offer assistance as a low-interest second mortgage.
This type of assistance usually involves making small monthly payments alongside your primary mortgage. However, the interest rates and terms are typically more favorable than traditional loans.
How the Funds Are Applied
In most cases, assistance funds are applied during closing. This means they directly reduce the amount of money you need to bring to the closing table.
Down Payment Assistant Example
| Home Price | $320,000 |
|---|---|
| Required down payment | $9,600 (3% of loan amount) |
| Down payment assistance | $7,500 |
| Amount needed from buyer after down payment assistance | $9,600 - $7,500 = $2,100 |
In this example, instead of bringing the full $9,600, the buyer would only need to cover the remaining $2,100 plus any closing costs. When you understand how down payment assistance works, it becomes easier to see how these programs can dramatically lower the upfront cost of buying a home.
Who Qualifies for Down Payment Assistance?
The answer varies depending on the program, but many share similar eligibility requirements. These programs are designed to help buyers who are financially ready for homeownership but may not have large savings for upfront costs.
Here are some of the most common factors that determine eligibility:
First-Time Homebuyer Status
Many down payment assistance programs are designed for first-time homebuyers.
However, the definition of “first-time buyer” is often broader than people realize. In many cases, you may still qualify if you haven’t owned a home in the past three years. You also qualify as a first-time homebuyer if you have only previously owned a home with an ex-partner.
Income Limits
Many programs have income limits based on your household size and the median income in your area. Check income requirements for the specific program you want to use to see if you qualify.
These limits help ensure that assistance goes to buyers who need it most. However, the limits are often higher than people expect. Even households with moderate or middle incomes may qualify.
For example, the Michigan State Housing Development Authority offers an MSDHA First-Generation Down Payment Assistance Program for Michigan residents. Among other requirements, homebuyers must fall within the income limits set by the MSDHA. Grand Rapids, MI residents in a one to two-person household must make $127,680 or less to qualify in 2026.
Credit Score Requirements
Most programs require a minimum credit score, but the exact number varies depending on the loan program being used.
In many cases, the credit score requirement follows the guidelines of the mortgage loan, such as FHA, USDA, or conventional financing. For example, that same MSDHA First-Generation Down Payment Assistance Program must be combined with an MI Home Loan. This loan type requires a minimum credit score of 640.
Homebuyer Education Courses
Some programs require buyers to complete a homebuyer education course before closing. These courses help buyers better understand the responsibilities of homeownership, budgeting, and the mortgage process.
Location Requirements
Because many assistance programs are offered by state and local agencies, eligibility can depend on where you’re buying a home.
Different states, counties, and cities may offer different types of assistance.
If you’re wondering how you qualify for down payment assistance, the best approach is to explore programs early and talk with a lender who can help identify options that fit your situation.
Using Down Payment Assistance With Neighbors Bank
Neighbors Bank offers loan options that may work alongside down payment assistance programs, including FHA, conventional, and USDA loans.
Below is a simple overview of the assistance options we offer for common loan types:
USDA Loan Forgivable DPA Program
| Max Assistance Offered | 3.5% of the purchase price (or appraisal value) |
|---|---|
| Minimum Credit Score | 660 |
| Property Type | 1–2 unit property |
| Loan Term | Fixed-rate loan |
| Forgiveness Period | Forgiven after 3 or 5 years |
| Occupancy Requirement | Must remain your primary residence |
| Max Down Payment at Closing | 10% |
USDA Loan Repayable DPA Program
| Max Assistance Offered | 5% of the purchase price (or appraisal value) |
|---|---|
| Minimum Credit Score | 660 |
| Property Type | 1–2 unit property |
| Loan Term | Fixed-rate loan |
| Repayment Period | Fully amortizing loan over 10 years |
| Occupancy Requirement | Must remain your primary residence |
| Max Down Payment at Closing | 10% |
FHA Loan Forgivable DPA Program
| Max Assistance Offered | 3.5% of the purchase price (or appraisal value) |
|---|---|
| Use of Funds | Can be used for down payment and/or closing costs |
| Minimum Credit Score | 660 |
| Property Type | 1–2 unit property |
| Loan Term | Fixed-rate loan |
| Forgiveness Period | Forgiven after 3, 5, or 10 years |
| Occupancy Requirement | Must remain your primary residence |
| Minimum LTV of 1st Mortgage | 90% |
| Max Down Payment Required at Closing | 10% |
FHA Loan Repayable DPA Program
| Max Assistance Offered | 3.5% to 5% of the purchase price (or appraisal value) |
|---|---|
| Use of Funds | Can be used for down payment and/or closing costs |
| Minimum Credit Score | 660 |
| Property Type | 1–2 unit property |
| Loan Term | 10-year fixed-rate loan term |
| Repayment Period | Fully amortizing loan over 10 years |
HomeReady©/HomePossible© Loan DPA Program
| Max Assistance Offered | $2,500 credit |
|---|---|
| Minimum Credit Score | 660 |
| Income Limit | Annual income must not exceed 140% of FNMA or FHLMC AMI |
Conventional Loan Repayable DPA Program
| Max Assistance Offered | 4% of the purchase price or appraised value |
|---|---|
| Max Down Payment at Closing | 20% |
| Loan Term | 30-year fixed-rate loan term |
| Repayment Terms | Full balance must be paid off if the home is sold, refinanced, transferred, or the first mortgage is paid off early |
To learn about the detailed list of qualifications needed or to check your program eligibility, get started here, and a loan expert will be in touch to discuss your options.
How to Apply for Down Payment Assistance
We’ve created an easy way for you to check your eligibility for several low down payment or no-down-payment loan programs. Borrowers can use this form to:
Explore eligibility for down payment assistance
Check qualifications for low-down-payment or no-down-payment mortgage programs
Speak with a loan expert about available options
Another option is researching down payment assistance programs offered by your state or local housing authority. Many states, counties, and cities offer their own assistance programs designed to support homebuyers in their communities.
Down Payment Assistance FAQs
Is down payment assistance real?
Yes, down payment assistance programs are real and available to homebuyers in many areas across the country. These programs are typically offered by:
State housing finance agencies
Local governments
Nonprofit housing organizations
Community development programs
Banks and credit unions
Their goal is to help qualified buyers overcome upfront financial barriers so they can achieve homeownership.
Do you have to pay back down payment assistance?
It depends on the type of program. Some forms of down payment assistance, such as grants. do not require repayment as long as program rules are met.
Others may be structured as forgivable loans that disappear over time, deferred loans that are repaid when you sell or refinance or low-interest loans with manageable payments. The exact terms depend on the specific program.
Can I qualify if I’m not a first-time homebuyer?
You may be able to qualify for certain down payment assistance programs without actually being a first-time home buyer. Some of these programs allow repeat buyers who qualify based on income, location or loan type.
Additionally, many programs define a “first-time buyer” as someone who has not owned a home in the past three years. That means some repeat buyers may still qualify. It’s always worth checking before assuming you’re not eligible.
What credit score do you need for down payment assistance?
There isn’t one universal credit score requirement for down payment assistance programs. Instead, the minimum score usually follows the requirements of the mortgage loan you’re using. For example, FHA, conventional, and USDA loans each have their own credit guidelines.
The good news is that perfect credit isn’t required for many programs. Check with your lender or the specific program to figure out if your credit score is on the necessary level for applying. If it’s not, it may be worth taking some small steps to start improving your credit, such as paying off large credit card balances and making sure you are making monthly payments on time.
Are there income limits for down payment assistance programs?
Yes, most down payment assistance programs include income limits based on household size and the area where you are purchasing.
However, many buyers are surprised to learn that these limits are often higher than expected. Some programs are designed specifically for moderate-income households rather than only low-income buyers. The best way to know if you qualify is to check your eligibility.
Can down payment assistance be used for closing costs, too?
Sometimes you may be able to use down payment assistance program to help pay for closing costs, too. While many programs focus on the down payment itself, some forms of down payment assistance can also be applied toward closing costs.
This can significantly reduce the total amount of money needed upfront when buying a home. Program rules vary, so it’s important to confirm how funds can be used.
Does using down payment assistance increase my monthly payment?
Depending on how the down payment assistance program works, you may have a higher monthly payment than you would without down payment assistance.
Some down payment assistance programs, such as grants or forgivable loans, do not affect your monthly mortgage payment at all. Other programs may involve a small second loan, which could add a modest payment depending on the structure.
For many buyers, the tradeoff of lower upfront costs makes homeownership possible sooner. If taking on a higher monthly cost means you will struggle to make the payment, though, it may not be a good idea. Consider your budget and the long-term value of using down payment assistance when deciding if it’s worth it for you.
How do I find down payment assistance programs in my area?
Most down payment assistance programs are location-specific. They may be offered at the state, county, or city level.
However, searching on your own can sometimes feel overwhelming. Talk to a knowledgeable lender who can help you identify available programs and determine which ones you may qualify for.
Is down payment assistance hard to apply for?
Applying for down payment assistance can involve a few additional steps, but the process is usually manageable.
In order to apply for this type of assistance, you may need to:
Provide income documentation
Complete a homebuyer education course
Submit additional paperwork for program approval
While it requires some extra work, your lender helps guide you through the process. The extra paperwork will likely be worth it for the extra help in purchasing your home.
Can down payment assistance delay closing?
Delays can happen if assistance programs are explored late in the homebuying process. Some programs require approval from housing agencies or additional documentation, so if you are planning to apply for one, start the process early. Starting the conversation about down payment assistance programs in advance can help keep your timeline on track.
Do I have to live in the home if I use down payment assistance?
Yes, in most cases, you must live in the home if you use down payment assistance. Down payment assistance programs are typically designed for primary residences, not investment properties or vacation homes.
What’s the biggest mistake buyers make with down payment assistance?
One of the most common mistakes buyers make with down payment assistance programs is assuming they won’t qualify. Many buyers never explore them because they believe their income is too high or their credit score is too low.
In reality, many programs exist specifically to help everyday buyers overcome upfront costs. If you’re considering buying a home, exploring down payment assistance early in the process can help you understand what options are available and bring you one step closer to affordable homeownership.
Emily Kittle is an experienced underwriter with a strong background in risk assessment, training, and loan decision-making. She excels at solving complex mortgage challenges and guiding loans to closing using creativity and critical thinking.
