State and local programs can cover part or all of your down payment and closing costs. Here is how the money works, who qualifies, and where to look first.
For many first-time buyers, the down payment is the hardest part. State, county and city agencies run down payment assistance programs that can cover part or all of the cash you need at closing. This guide explains how that money works, who usually qualifies, and how to find legitimate programs at no cost.
What Down Payment Assistance Actually Is
Lenders rarely cover the full price of a home. They expect you to contribute cash of your own, and that share is the down payment. Saving it, on top of closing costs, is where many buyers stall.
Down payment assistance is money from a government agency or nonprofit that helps cover the down payment and, often, closing costs too. The amounts and rules vary by place. Arkansas’s program provides $1,000 to $15,000. Minnesota Housing offers downpayment and closing cost loans totaling up to $18,000. In Maryland, contributions from partner organizations are matched up to $2,500. One constant: assistance almost always must be paired with a first mortgage from the same agency.
Grants, Deferred Loans and Silent Seconds Compared
Assistance is not one product. Before you apply, know which form you are signing up for, because repayment terms differ.
| Form | How repayment works | Example |
|---|---|---|
| Grant or matched funds | No repayment, though eligibility rules still apply | Maryland Mortgage Program matches partner funds up to $2,500 |
| Deferred second mortgage | No interest and no monthly payments; the balance comes due in one payment later | Minnesota’s Deferred Payment Loan, due when the home is sold, refinanced or the first mortgage is paid off |
| Monthly second mortgage (“silent second”) | Small payments alongside your first mortgage, usually at favorable terms | Arkansas’s program: $1,000 to $15,000 as a second mortgage with a 10-year term |
A silent second is a second mortgage recorded against your home that ranks behind the main loan. The name sounds ominous, but a disclosed loan from a public housing agency is a normal legal tool. What matters is the repayment schedule in the note you sign.
Who Typically Qualifies
Programs set their own rules, but three screens come up repeatedly.
- Income caps and purchase price limits. These programs target moderate-income buyers, with ceilings on household income and home price.
- First-time buyer definitions. “First-time” often does not mean never owned. Minnesota Housing treats you as a first-time buyer if you have not owned the home you live in at any point during the past three years. Some programs waive the requirement in targeted areas or for qualified veterans.
- Homebuyer education. Many programs require an approved course before closing. Texas’s program requires one, and Minnesota requires at least one borrower to complete a course when every borrower on the loan is a first-timer.
If your income is too high for a first-time program, ask whether the same agency runs a version for repeat buyers.
How to Find Programs Without Paying a Middleman
Start with your state’s housing finance agency; the agencies in Texas, Arkansas, Maryland and Minnesota described above are examples. HUD also lists homebuying programs by state on its website.
Two more free, official routes:
- A HUD-approved housing counseling agency. Counselors build a plan around your situation free of charge, and many know the programs available in your county or city.
- The HOPE hotline. The Consumer Financial Protection Bureau points buyers to HUD’s nationwide agency list and the hotline at (888) 995-HOPE (4673), which takes calls around the clock.
Some help is even more local. HUD’s state pages list county-level programs, such as Florida’s SHIP down payment and closing cost assistance, administered county by county.
Worth knowing
HUD-approved housing counseling is free. If a company charges a fee just to tell you which assistance programs exist, you can get the same information at no cost from HUD or a counselor.
The Fine Print: Residency, Repayment and Selling Early
The conditions attached to assistance matter as much as the money.
- Repayment triggers. Deferred loans are not free money. Minnesota’s deferred loan charges no interest and requires no monthly payments, but the full balance comes due in a single payment when the loan term runs out. It can come due sooner if you move, sell or refinance the home (unless you refinance through the same agency’s Step Up program) or retire the first mortgage ahead of schedule.
- Tied first mortgages. Assistance typically works only with that agency’s own first mortgage, so you cannot attach it to any loan you find elsewhere.
- Refinancing limits. Refinancing your first mortgage outside the agency’s programs can trigger repayment of the assistance.
- Owner-occupancy. These programs exist to help people buy a home to live in themselves. Renting it out or selling soon after can cost you the benefit.
Read the assistance note as carefully as the main mortgage before you sign.
Working With Your Lender, and Red Flags to Watch
Tell your lender early that you plan to use assistance. The lender underwrites both loans together, so a surprise at closing can delay the deal. Getting pre-approved for a mortgage first sets a realistic budget before you layer assistance on top.
Assistance also has to fit your loan type. FHA loans allow lower down payments and are designed in part for first-time buyers. With less than 20 percent down on a conventional loan, your lender may require mortgage insurance, which adds to your monthly cost. VA and USDA loans require no down payment from eligible borrowers.
Red flags to check before you apply:
- Anyone charging a fee to “find” programs or handle eligibility on your behalf. The official lists and counselors are free.
- Promises of guaranteed approval, or pressure to sign quickly. Real programs publish their eligibility rules and income limits.
- Documents you are asked to sign without reading, especially the second mortgage note.
One small first step: look up your state housing finance agency’s homebuyer page and write down its income limits, purchase price limits and first-time definition.
Related guides
- How Much Down Payment You Need, and When PMI Ends: how your down payment size affects mortgage insurance and your monthly cost.
- FHA or Conventional Loan for Your First Home?: choosing the first mortgage your assistance will pair with.
- Getting Pre-Approved for a Mortgage, Step by Step: why approval comes before house hunting.
The short version
- Down payment assistance comes from state, county and city agencies, and it almost always must be paired with a first mortgage from the same agency.
- Assistance may be a grant, a deferred second mortgage with no monthly payments, or a small monthly second mortgage; the repayment terms differ.
- "First-time buyer" often means you have not owned the home you live in during the past three years, and many programs require a homebuyer education course.
- Start with your state housing finance agency or a HUD-approved housing counselor, both free; watch for anyone charging a fee just to find programs.
- Deferred loans can come due if you move, sell, refinance or pay off the first mortgage early, so read the repayment triggers before signing.
Readers also ask
Do I ever have to repay down payment assistance?
It depends on the form. Grants do not have to be repaid, but loans do. Minnesota’s deferred loan, for example, comes due in one final payment when the loan term ends, or earlier if you sell, refinance, move or retire the first mortgage ahead of schedule.
What counts as a first-time homebuyer?
Often, not never having owned. Minnesota Housing, for example, treats you as a first-time buyer if you have not owned the home you live in at any point during the past three years. Some programs also waive the requirement in targeted areas or for veterans.
Can I use assistance with an FHA loan?
Possibly, but each program decides which loans its money can pair with, and most tie assistance to their own first mortgage. FHA loans allow lower down payments and are aimed in part at first-time buyers, so ask the agency which loan types are allowed.
How do I find programs where I live?
Check your state housing finance agency’s homebuyer page and HUD’s list of homebuying programs by state. A HUD-approved housing counselor can help at no cost, and the HOPE hotline at (888) 995-HOPE (4673) takes calls around the clock.
This guide is general information about U.S. mortgages, not financial, tax or legal advice. Loan terms depend on the lender and on your credit, income and property, so confirm the details with your lender, and see consumerfinance.gov for official guidance.
