Let’s face it, buying a home is exciting, but it’s definitely not cheap. Even with an FHA loan, which is designed to make homeownership more accessible, the 3.5% down payment can feel like a mountain when juggling other expenses like closing costs, inspections, and moving trucks.
For many homebuyers, especially first-timers, that upfront cash can be a major roadblock. But the good news is that you don’t have to do it alone.
FHA loan down payment assistance programs exist specifically to help you clear that final hurdle and get the keys to your dream home. Whether you're buying your first house or just need a financial boost to get through the front door, these programs are designed to lighten the load.
What is Down Payment Assistance?
Down payment assistance (DPA) is financial help that covers part, or sometimes all, of the cash you need upfront for your down payment. It’s not a loan for the entire house, but it is a powerful tool that can shrink your out-of-pocket costs, making your path to homeownership smoother and faster.
If you use an FHA loan, DPA can be a game-changer. FHA loans already require less money down (just 3.5% of the purchase price), but that can still be thousands of dollars. For example, a $275,000 home requires $9,625 out of pocket (not including closing costs).
The beauty of down payment assistance is that it’s designed with buyers like you in mind. Whether you're a first-time buyer, a single parent, a teacher, or someone who simply hasn’t been able to save up a big lump sum, there’s likely a program out there that fits your needs.
Types of FHA Down Payment Assistance
There’s no one-size-fits-all with DPA. Programs vary, but most fall into one of four main categories. Here’s a closer look at what’s out there:
1. Grants
Let’s start with the best-case scenario, which is free money! For those who qualify, grants are funds you don’t have to ever pay back. They’re typically offered by state or local housing agencies and nonprofits and are designed to help buyers overcome financial barriers to homeownership.
For example, you could qualify for a $5,000 grant if you're a first-time homebuyer, buying in a targeted neighborhood, or meet certain income guidelines. Oftentimes, you just need to complete a homebuyer education course and work with an approved lender.
Grants can significantly reduce upfront costs and, in some cases, cover the entire down payment.
2. Forgivable Loans
Forgivable second mortgages are technically loans, but they're completely forgiven if you meet the conditions. Usually, for this to happen, you must stay in the home for a set number of years
Think of it as a loan that slowly disappears. A common setup might be a $10,000 forgivable loan that’s erased after five years of owner-occupancy. If you sell or move before then, you might need to repay a portion. Otherwise, it’s like a delayed gift.
3. Deferred Second Mortgages
These programs provide a second loan to help cover the down payment, but the key here is you don’t have to start repaying it right away. Instead, repayment is deferred until you sell, refinance, or move out of the home.
This means you get help now when you need it most, and you don’t have to think about repayment for years. It’s ideal for buyers who need short-term support but expect their financial picture to improve over time.
4. Repayable Second Mortgages
Finally, some programs offer repayable second loans. These work like traditional loans, meaning you get funds for your down payment, then pay it back monthly with interest.
These loans often come with low fixed interest rates and longer terms, which keep payments affordable. So, if you’re serious about buying a home and can handle a small monthly payment, this option can give you the necessary support to move forward.
You use all of these assistance types in addition to your FHA loan, not instead of it. They simply help cover the upfront costs so you can close the gap between “I wish” and “I own.”
What is the FHA Payment Supplemental Program?
Though often mistaken for down payment assistance, the FHA payment supplemental program was a pilot initiative launched in 2024 to help FHA-insured borrowers facing financial hardship avoid foreclosure. It allowed mortgage servicers to temporarily reduce a homeowner’s monthly mortgage payment by combining a partial claim with supplemental payments made on the borrower’s behalf for up to three years.
As of 4/30/2025, the FHA payment supplemental program is no longer available.
How to Get FHA Down Payment Assistance
You’ll be glad to know the process is easier than you might think if you can find a lender that provides down payment assistance options. At Neighbors Bank, we offer down payment assistance for both conventional and FHA loans. We also offer other home loans that require 0% down payments for eligible borrowers.
Before jumping in, it’s important to understand that each program has its own FHA down payment assistance requirements. These can vary based on factors like income limits, credit scores, homebuyer education courses, and whether you’re a first-time buyer. Some programs may also have property location restrictions or require you to live in the home for a minimum number of years.
Rest assured that requirements are straightforward and designed to ensure the program is a good fit. Here are some approaches to get started:
Partner with a Knowledgeable Lender
One approach is to connect with a lender who specializes in FHA loans and DPA programs. Not every lender offers these services, so make sure to ask up front. A good loan officer will help you navigate the maze of eligibility requirements and program options and ensure you’re not leaving any money on the table.
They can also help determine which programs you qualify for based on your income, credit score, location, and other factors. Working with a lender who’s experienced in FHA down payment assistance requirements ensures that your application process runs smoothly and that you’re fully informed about every opportunity available to help fund your home purchase.
Research State and Local Programs
Most down payment assistance is offered at the state and local levels, so it pays to do a little homework. Every state has its own housing finance agency, and many counties and cities have additional programs.
Some examples include:
CalHFA in California offers grants and deferred-payment loans specifically designed to assist FHA buyers with their down payment and closing costs.
TSAHC in Texas provides targeted down payment assistance for public service workers such as teachers, police officers, and firefighters, making homeownership more attainable for those who serve the community.
Florida Housing offers various down payment assistance programs across the state, helping FHA buyers reduce their upfront costs and become homeowners faster.
Remember to also check with local nonprofits, credit unions, and community development groups. They often administer their own programs or partner with government agencies to deliver assistance.
Explore National Options
While local options are more common, a few national programs are also available regardless of where you live. For example, the National Homebuyers Fund (NHF) offers grants of up to 5% of your loan amount, helping to significantly reduce your out-of-pocket costs.
Whether it’s a grant, a forgivable loan, or a low-interest second mortgage, down payment assistance can help you buy a home sooner and with less stress. Thousands of people across the country have used these tools to move from renting to owning, and you can too.
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.
