How to Buy a Home Without Saving a Down Payment First
Programs That Cover Down Payments and Closing Costs
You can buy a home without putting money down through down payment assistance programs, which are offered by state housing agencies, nonprofits, and some mortgage lenders. These programs give you a grant or a second loan to cover your down payment and closing costs, so you only need to may have access to for the main mortgage itself. The money comes from different sources depending on where you live — some states fund them, some cities do, and some are run by nonprofits that receive donations or government grants.
The catch is that not all programs work the same way. Some give you the money as a gift that you never repay. Others give you a loan at zero interest that you repay over time, usually after you sell the house or refinance. A few require you to repay it only if you sell within a certain number of years. Which program you can use depends on your state, your county, your income, and the price of the home you want to buy.
The fastest way to find what exists where you live is to call your state housing finance agency or search "down payment assistance [your state]" online. Many states have a single program or a list of programs on their website. If your state does not have a clear answer, ask your mortgage lender — many lenders partner with nonprofits and can tell you which programs they work with.
Key Takeaways
- Down payment assistance programs cover your down payment and closing costs as either a grant you keep or a loan you repay, depending on the program.
- Your state housing finance agency or your mortgage lender can tell you which programs you may be able to use based on your income and location.
- Most programs require you to have a mortgage pre-approval letter before you apply, so you need to may have access to for the main loan first.
- Some programs limit the price of the home you can buy or require you to buy in certain neighborhoods, so read the rules before you start house hunting.
- Processing times vary from two weeks to two months, so start the process early if you have a closing date in mind.
How Down Payment Assistance Programs Work
When you use a down payment assistance program, the money usually flows directly to your lender or title company at closing, not to you. You do not receive a check. Instead, the program pays the lender what you owe for the down payment and closing costs, and your name goes on the deed as the owner. If the program is a loan, you sign a promissory note that says you will repay it — either all at once when you sell, or in monthly payments, depending on the program's terms.
Most programs require you to have already been pre-approved for a mortgage before you apply for down payment help. This means a lender has looked at your credit, income, and debts and said yes, they will lend you money for the house. Once you have that pre-approval letter, you can apply to the down payment program. The program then verifies your income and checks that the house you want to buy meets their rules — for example, some programs only work in certain counties or only for homes under a certain price.
After you are approved for down payment assistance, the program sends the money to your closing. You bring your pre-approval letter, proof of income, and a signed purchase agreement to the closing table, and the down payment assistance money is added to your loan documents. You sign everything, and you own the house.
Types of Down Payment Programs: Grants, Loans, and Forgivable Loans
Grant programs give you money you do not repay. These are the rarest and most competitive. They are usually run by nonprofits or local governments and often have income limits — you have to earn below a certain amount to be considered. Some grant programs are only for first-time homebuyers, and some are only for people buying in neighborhoods that the city wants to develop. If you find a grant program in your area, apply early, because they often run out of money.
Forgivable loan programs give you a loan at zero interest that disappears if you stay in the house for a set number of years — usually five to ten years. If you sell or refinance before that time is up, you have to repay the loan in full. If you stay, the loan is forgiven and you owe nothing. These programs are common in states like California, Texas, and New York, and they are a middle ground between a grant and a regular loan.
Second mortgage programs give you a loan that you repay over time, usually 10 to 30 years, at zero or very low interest. You make monthly payments on this loan in addition to your main mortgage payment. Some programs only require you to repay if you sell the house, so your monthly payment is zero until you move. These are the most common type of down payment assistance.
Income Limits and Other Rules You Need to Know
Most down payment assistance programs have an income limit, which means you have to earn below a certain amount to be considered. The limit varies by program and by family size. For example, a program might say you can earn no more than 80 percent of the area median income for your county. If you are a family of four in a county where the median income is $100,000, you might have to earn less than $80,000 to may have access to. Some programs are more generous and allow up to 120 percent of median income.
Programs also often have rules about the home itself. Some only work for homes under a certain price — for example, $400,000 or $500,000. Some only work in certain counties or neighborhoods. Some require you to buy a home that has been inspected and meets building codes. A few programs only work for first-time homebuyers, which usually means you have not owned a home in the past three years.
Your credit score matters too. Most programs require a credit score of at least 620, though some are more flexible and will work with scores as low as 580. If your score is very low, you may need to wait and build credit before you apply, or you may need to find a program that specializes in lower credit scores.
How to Find Programs in Your State
Start by visiting your state's housing finance agency website. Every state has one — search "[your state] housing finance agency" or "[your state] down payment assistance." The website will list programs that exist in your state, who runs them, and how to apply. Some states have one central program; others have dozens run by different nonprofits and local governments.
If your state's website is unclear, call your state housing finance agency directly. They can tell you which programs are currently open and taking new people, because many programs run out of money and close to new applications for months at a time. Knowing whether a program is open before you spend time applying saves you weeks of waiting.
Your mortgage lender is another source. Many lenders partner with nonprofits and have a list of down payment assistance programs they work with. When you get pre-approved for a mortgage, ask your lender which programs they recommend and which ones they have seen work fastest in your area. Some lenders even have their own down payment assistance programs.
You can also search the National Housing Trust Fund database or call 211 (a free referral line) and ask for down payment assistance programs near you. Both will give you names and phone numbers of programs in your area.
What Documents You Will Need to Gather
Before you apply, collect your mortgage pre-approval letter from your lender. This is the single most important document. Without it, most programs will not even look at your application. The letter should show your name, the loan amount you were pre-approved for, and the lender's name and contact information.
You will also need proof of income for the past two years. This usually means your last two years of tax returns and your most recent pay stubs (usually the last two months). If you are self-employed, you may need to provide profit-and-loss statements or business tax returns. If you receive income from Social Security, disability, or unemployment, bring documentation of that too.
Bring a signed purchase agreement for the home you want to buy. This shows the program that you have actually found a house and have made an offer. Some programs will let you apply before you have a purchase agreement, but most want to see one.
You will also need to provide your Social Security number, date of birth, and contact information. Some programs ask for a list of all your debts — credit cards, car loans, student loans, and any other money you owe. Have those account numbers and balances ready.
Timeline: How Long the Process Takes
From the moment you apply to the moment money is in your closing, the process usually takes two to eight weeks, depending on the program and how quickly you provide documents. Some programs are faster — a few can approve you in one to two weeks. Others are slower, especially if they are run by nonprofits with small staff.
The bottleneck is usually the program's verification of your income and the lender's final approval of your mortgage. If you submit all your documents at once and your income is straightforward, the process moves faster. If the program has to ask you for more information or if your income is complicated (for example, if you are self-employed or recently changed jobs), it takes longer.
Tell your real estate agent and your lender that you are using down payment assistance, because they need to know the timeline. Some programs require the lender to sign off on the assistance before closing, which adds a step. If your closing date is coming up soon, call the program and ask if they can rush your application.
What Happens If You Cannot Find a Program in Your Area
If your state or county does not have a down payment assistance program, or if all the programs are closed, you have other options. Some mortgage lenders offer down payment assistance loans as part of their own products — ask your lender if they have one. These are not free, but they are another way to buy without saving a large down payment first.
You can also look for programs run by nonprofits that work across state lines. Some national nonprofits offer down payment assistance in multiple states. Search "down payment assistance nonprofit [your state]" to find them.
Another option is to ask the seller to pay your closing costs. In some markets, sellers will agree to cover your closing costs as part of the purchase agreement. This does not give you a down payment, but it reduces the amount of cash you need at closing. Talk to your real estate agent about whether this is common in your area.
Frequently Asked Questions
Do I have to repay down payment assistance money?
It depends on the program. Some programs give you a grant that you never repay. Others give you a loan at zero or low interest that you repay over time or when you sell the house. Read the program's rules before you apply so you know what you are signing up for.
Can I use down payment assistance if I have bad credit?
Most programs require a credit score of at least 620, though some work with scores as low as 580. If your score is lower, look for programs that specialize in lower credit scores, or wait a few months and work on raising your score before you apply.
What if I do not have a mortgage pre-approval yet?
Get pre-approved first. Most down payment assistance programs will not even look at your application without a pre-approval letter from a lender. Pre-approval is free and takes a few days. Once you have it, you can apply for down payment assistance.
Can I use down payment assistance to buy a second home or investment property?
Most programs are only for primary residences — the home you will live in. Some programs specifically require that you are a first-time homebuyer. Check the program's rules before you apply.
What if the down payment assistance program runs out of money?
Many programs have limited funding and close to new applications when the money runs out. Call the program before you apply to ask if they are currently open. If they are closed, ask when they expect to reopen or if there is a waiting list.