Down Payment Assistance: How to Get Help Buying a House

Photo to accompany story about how to find down payment assistance. Getty Images
We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

If you’re a first-time homebuyer, you don’t have the advantage of putting the proceeds of a home sale toward your purchase. As a result, the typical first-time buyer financed nearly all of their home’s purchase price, or 94%, according to a 2019 National Association of Realtors (NAR) survey

At the same time, the median home price was $257,000. With a 6% down payment, you’d need to come up with over $15,000. When you tack on another 3%-6% of the purchase price for closing costs, the upfront sum could double.

If you don’t have that money, and you’re sure you’re in financial shape to buy a home, there is a way to get free or discounted down payment assistance without dipping into your retirement funds or borrowing from your relatives. Taking advantage of a down payment assistance program (DPA) can keep your savings accounts intact or increase your down payment. And many of these programs offer assistance with closing costs, which reduce your out-of-pocket expenses even further.

There are about 2,400 homebuyer assistance programs across the country, says Sean Moss, senior vice president and director of operations and customer support at Down Payment Resource, an online aggregator of homebuyer assistance programs. But these organizations are administered at the state, county, and local level. Properties located just a few miles apart may qualify for completely different aid. And, the qualification guidelines for a buyer or property vary from program to program, Moss continues. That’s why it’s important to do your research.

Types of Down Payment and Closing Cost Assistance

What’s so great about these programs is they can help you start with more equity in your home or keep cash in your bank account. If this allows you to have a large enough down payment to start with 20% equity, you won’t pay private mortgage insurance, which can cost 1%-2% of the loan principal per year. 

As an example, homebuyers in Illinois have access to several different programs through the Illinois Housing Development Authority. Currently, some of its programs offer up to $7,500 in down payment or closing cost assistance as a forgivable or deferred loan. For a $200,000 30-year mortgage with a 3% interest rate, that would save you nearly $4,000 in interest and reduce your monthly payment by around $30. 

Down payment and closing cost assistance come in an array of forms. You should understand how each can impact your bottom line. Some are essentially gifts, while others are repaid with low or no interest.


The best type of down payment or closing cost help is a grant. If you qualify, a grant is free money because it doesn’t need to be repaid. 


The most common type of assistance is a loan. Some are straightforward second mortgages which are paid monthly along with your first home loan. These loans typically have favorable terms and low interest rates. If it’s an option, a forgivable or deferred loan can be a better choice. 

Forgivable Loan

Forgivable loans are forgiven over a set timeframe. If you have a loan that’s forgiven over five years, the loan principal would be reduced by an equal amount each month for 60 months. With a forgivable loan, you only have to repay it if you sell the home or refinance before the loan is fully forgiven. Even then, you’ll only be responsible for the remaining principal. 

Other than a grant or cash assistance, this is the best type of assistance because each month you’re building equity without paying anything extra.

Deferred Loan

Deferred loans are repaid only when you sell the home or refinance your mortgage. For example, if you qualified for $5,000 in down payment assistance as a deferred loan it wouldn’t increase your monthly payment. However, a deferred loan wouldn’t increase the equity you have in your home because it’s still money you owe.

PRO TIP: For reference, we outlined a sample list of first-time homebuyer programs by state. 

Where to Find Down Payment Assistance

Talking with an experienced local real estate professional is a great way to get an idea of what DPAs are available. Your real estate agent or mortgage professional are good places to start. You could also reach out to a HUD-approved housing counselor for help with the home buying process, and they should also be aware of local assistance programs. These counselors charge a fee for their service unless you qualify for a fee waiver.

Because down payment assistance programs are so specific to an area, start your search with Google by entering “down payment assistance in [state, county, city],” recommends Scott Lindner, the national sales director for mortgage lending at TD Bank

You can also research what’s available by entering the property address details on You’ll have to enter your email addresses to get the results sent to you, but you’re not required to subscribe to the newsletter. A handful of searches we did on the site returned relevant results and even highlighted COVID-19 related program changes, so the information appears up to date. 

Lenders may also have their own products for first-time home buyers, such as a reduction of fees or a closing cost grant, Moss said. As you’re shopping around for the best mortgage rates, ask about specific loans tailored to first-time homebuyers

Also, non-profit organizations sometimes offer some form of financial assistance as part of a broader mission to increase homeownership in underserved communities. These often aren’t included in a search, like Habitat for Humanity or the Neighborhood Assistance Corporation of America

How to Qualify for Home Buying Assistance Programs

Once you know what homebuying assistance is available in your area, you’ll need to make sure you qualify. Most down payment and closing cost assistance programs target first-home buyers, but if you’ve owned a home before, you may still be eligible. 

“It’s almost universal: if you haven’t owned a home in the last three years, you’re a first-time homebuyer,” Moss said. There are even exceptions to the rule. In some cases, if you’re divorced or have military service, the three-year requirement is waived.

Home purchase assistance programs frequently require the borrower to take first-time homebuyer education classes to qualify. Whether or not it’s required by the program, Lindner recommends it anyway. These classes are an excellent way to educate yourself on the obligations of homeownership outside of just the mortgage and property taxes, he says.

Other loans or grants may only be available if you fall within a specific income range. These income guidelines are typically based on the average household income of the area where you’re purchasing a home. Other programs are set up to help people in certain professions, serving in the military, or as a firefighter, law enforcement officer, or healthcare worker could expand your housing assistance options.

The type of mortgage you take can impact what assistance you qualify for. This is something you should talk to your lender about because some loans have restrictions, says Lindner. You may find a mortgage requires assistance to be a forgivable loan, he continued.

Aside from whether or not you qualify, the property will also need to meet certain standards. Each program serves specific areas or neighborhoods, so the location of the home matters. There are also neighborhood revitalization organizations rehabbing homes and then offering assistance to qualified buyers. And most DPAs place a limit on the purchase price of the home based on home values in the area.

One last thing to consider when factoring in home purchase assistance to your budget is funding. DPAs don’t have bottomless bank accounts. Program funds may be used up by the time you decide to purchase. “Some of these down payment assistance funds are seasonal,” Moss said. He doesn’t recommend waiting because there is no guarantee the money or program you’re waiting on will be around the following year.

Other Ways to Come Up With a Down Payment

Some government-backed loans offer 100% financing, but these mortgages come with additional restrictions. U.S. Department of Agriculture mortgages are only available for properties in qualifying rural areas. A Department of Veterans Affairs loan is an option if you or your spouse has a military background. 

Aside from that, a bigger down payment is ideal because it reduces your monthly costs by shrinking your loan principal and can qualify you for a better mortgage rate. That’s why some experts recommend you put 20% down when you purchase a home.

According to the NAR survey mentioned above, most homebuyers end up covering the down payment with their savings. If you’re finding it hard to build up your savings, this guide can help you create a budget you can stick to. Family members are also allowed to give funds for a home purchase. But these must be documented as a gift and not a loan for your lender’s assessment. 

You are also allowed to borrow from your retirement account to cover certain home-buying expenses. The rules are different depending on what type of retirement account you have and your personal circumstances. So if you’re looking into this option, consult with a retirement or tax professional first. While the CARES Act has made it easier to withdraw from a 401(k) account without penalty, you will need to pay the money back. Keep in mind that using your retirement funds means missing out bankruptcy protections, tax advantages, and on potential growth through compounded interest.