How to Find Money for Your Mortgage Down Payment
Where down payment assistance actually comes from
Down payment assistance is not a single program you apply to. Instead, it is a collection of separate programs run by nonprofits, state housing agencies, local governments, and sometimes lenders themselves. Each one has its own rules about who can use it, how much money is available, and what you have to do in return.
The money typically comes in three forms: grants you do not repay, forgivable loans that disappear if you stay in the home for a set number of years, and second mortgages you repay at a lower rate than a standard loan. Some programs combine these—for example, a grant covering part of the down payment plus a forgivable loan covering the rest. The key difference from a regular mortgage is that these programs are designed to reduce the amount of your own cash you have to bring to closing.
Your path to finding assistance depends on where you live and what your income is. State housing finance agencies maintain searchable databases of programs available in your area. The National Council of State Housing Agencies (NCSHA) website lists every state agency and links to their program pages. Local nonprofits like NeighborWorks and community action agencies often administer programs and can tell you which ones are currently accepting new borrowers in your county.
Key Takeaways
- Down payment assistance comes from state agencies, local governments, nonprofits, and lenders, each with different income limits, property price caps, and repayment terms.
- Your state housing finance agency website is the fastest way to see what programs exist in your area and whether they are currently open.
- Many programs require you to complete homebuyer education—usually a one-day class or online course—before you can receive funds.
- Forgivable loans and grants do not count as debt on your mortgage application, but some programs do require a second mortgage that affects your borrowing power.
- Lender-based programs often have fewer restrictions than government programs but may require you to use their mortgage product.
State and local government programs
Every state has a housing finance agency that runs down payment assistance programs using federal and state funding. These programs typically have income limits—often 80 to 120 percent of your area's median income—and cap the price of the home you can buy. Some programs are open statewide; others are limited to specific counties or cities where funding has been allocated.
To find your state's programs, go to your state housing finance agency website and look for "down payment assistance" or "first-time homebuyer programs." You will see a list of active programs, the income and price limits for each, and often a link to apply or contact information for a local partner organization. Many states also run programs through community action agencies, which are local nonprofits that handle applications and can answer questions about your specific situation.
Local governments—cities and counties—sometimes run their own programs using Community Development Block Grant (CDBG) funding or local tax revenue. These are often smaller and more competitive than state programs, but they may have fewer restrictions. Your city or county housing department website will list what is available locally. If you cannot find it, call your city's planning or community development department and ask whether down payment assistance programs exist in your area.
Nonprofit and community-based programs
Organizations like NeighborWorks, the National Urban League, and local community development corporations run down payment assistance programs in partnership with lenders and government agencies. These programs often combine financial help with homebuyer education and counseling, which means you will attend classes on budgeting, credit, and home maintenance before receiving funds.
Nonprofit programs tend to be more flexible than government programs about income and credit score requirements, though they may have smaller amounts of money available per borrower. Some focus on specific communities or populations—for example, programs for teachers, veterans, or residents of particular neighborhoods. To find nonprofits in your area, search "down payment assistance" plus your city name, or call 211 (a free referral line) and ask what homebuyer programs are available near you.
Many nonprofits also offer free or low-cost homebuyer education, which is often required by down payment assistance programs anyway. Taking a class through a nonprofit can sometimes make you a stronger candidate for assistance because you have already completed the education requirement.
Lender-based down payment assistance
Some mortgage lenders offer their own down payment assistance programs as part of their product lineup. These are typically grants or forgivable loans that reduce the amount you have to bring to closing. The catch is that you usually have to use that lender's mortgage to receive the assistance—you cannot shop around for a better rate elsewhere.
Lender programs often have fewer restrictions than government programs: they may not require homebuyer education, may have higher income limits, or may accept borrowers with lower credit scores. However, you should compare the lender's mortgage rate and fees against other lenders before deciding whether the down payment assistance makes up for a higher rate. A lower down payment is not worth paying an extra 0.5 percent in interest over 30 years.
Ask your lender directly whether they offer down payment assistance. If they do, request the terms in writing: how much money is available, whether it is a grant or forgivable loan, what happens if you sell the home early, and whether it affects your debt-to-income ratio for the mortgage.
Income limits, property price caps, and other restrictions
Most down payment assistance programs have an income limit—usually stated as a percentage of your area's median income. A program might say "80 percent of area median income" or "120 percent of area median income." Your area's median income is published by the U.S. Department of Housing and Urban Development (HUD) and varies by county. You can find your county's median income on the HUD website or ask your lender or nonprofit counselor.
Programs also cap the price of the home you can buy. This cap varies widely—some programs allow homes up to $300,000, others up to $500,000 or more, depending on your area and the program. If you are buying in an expensive market, check the price cap before you spend time on an application.
Many programs require you to complete homebuyer education before receiving funds. This is usually a one-day class or an online course covering budgeting, credit, the mortgage process, and home maintenance. Some nonprofits offer this free; others charge a small fee. The education requirement exists because programs want to reduce the risk that you will default on your mortgage.
Some programs also require you to have a minimum credit score—often 620 or higher—or to have been a U.S. citizen or permanent resident for a certain length of time. Read the program requirements carefully before applying, because not all programs are open to everyone.
How forgivable loans and grants affect your mortgage
The type of down payment assistance you receive matters for your mortgage application. A grant is assistance programs you do not repay and does not count as debt. A forgivable loan is a loan that disappears if you meet certain conditions—usually staying in the home for five to ten years. A second mortgage is a loan you actually repay, usually at a lower rate than your primary mortgage.
Grants and forgivable loans do not appear on your credit report and do not affect your debt-to-income ratio, which is what lenders use to decide how much they will lend you. This means they can help you may have access to for a larger primary mortgage without hurting your borrowing power.
Second mortgages, by contrast, do count as debt. If a program gives you a second mortgage, the lender will include that payment in your debt-to-income calculation. This can reduce the amount you can borrow for your primary mortgage. Ask the program whether the assistance is a grant, forgivable loan, or second mortgage before you commit, so you understand how it will affect your overall borrowing.
What happens if you sell or refinance early
If you receive a forgivable loan and sell the home before the forgiveness period ends, you will usually have to repay the remaining balance from your sale proceeds. For example, if you receive a $20,000 forgivable loan over ten years and sell after five years, you may owe $10,000 back to the program. This money comes out of your equity before you receive your profit.
Refinancing can trigger the same requirement. Some forgivable loan programs require you to repay the balance if you refinance before the forgiveness period ends. Others do not. Read the promissory note or loan agreement carefully to understand what triggers repayment.
Grants do not have this issue—if you receive a grant, it is yours to keep regardless of when you sell. Second mortgages work like any other loan: you repay them on schedule, and if you sell, the lender gets paid from your proceeds before you do.
How to find and apply for assistance in your area
Start with your state housing finance agency. Go to NCSHA.org, find your state, and click through to the agency website. Look for "down payment assistance" or "first-time homebuyer programs." Most agencies have a searchable database or a list of programs with links to apply.
If your state website is unclear, call the agency directly and ask what programs are available in your county. They can tell you which programs are currently open, what the income and price limits are, and whether you meet the basic requirements.
Next, contact your local nonprofit or community action agency. Call 211 or search "community action agency" plus your county name. These organizations often administer state programs and can walk you through the application process. They may also offer free homebuyer counseling, which can strengthen your application.
Finally, talk to mortgage lenders about their own programs. Once you have narrowed down which government and nonprofit programs you might use, ask lenders whether they offer matching assistance. Compare the total cost of the mortgage (rate plus fees) across lenders, not just the down payment assistance amount.
Frequently Asked Questions
Do I have to use the down payment assistance money, or can I save it and use my own cash instead?
Most programs require you to use the assistance as part of your down payment. You cannot receive the money and then not use it. However, you can combine assistance from multiple programs—for example, a state grant plus a nonprofit forgivable loan—to reach your target down payment.
What if I do not meet the income limit for a program?
Different programs have different limits. If you exceed the limit for one program, you may still may have access to for another. Some programs use 80 percent of area median income; others use 120 percent. Call your state housing agency or a local nonprofit to find programs that match your income level.
Can I use down payment assistance if I have bad credit?
Some programs require a minimum credit score, often 620 or higher. Others are more flexible, especially nonprofit programs. If you have been turned down for one program, ask whether others in your area have lower credit requirements. Completing homebuyer education can sometimes help your application even if your credit score is lower.
If I get a forgivable loan and refinance my mortgage, do I have to repay it?
It depends on the program's terms. Some forgivable loans require repayment if you refinance before the forgiveness period ends; others do not. Read your loan agreement before you refinance, or call the program and ask what happens if you refinance.
How long does it take to get down payment assistance?
Processing time varies by program, usually between two to eight weeks. Some programs are faster if you have already completed homebuyer education. Ask the program for an estimated timeline when you apply, and let your real estate agent and lender know you are waiting for assistance so they can plan accordingly.