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Mortgages

What is down payment assistance and how do you get it?

Down payment assistance can help you remove one of the main hurdles on your way to homeownership.

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A down payment is the portion of a home's purchase price paid upfront, rather than the part loaned to you by a bank or mortgage provider.

In 2023, the average down payment for first-time homebuyers was 8%, according to the National Association of Realtors. That can be a considerable obstacle for many would-be homeowners, but down payment assistance programs (DPAs) can help close the gap.

Down payment assistance

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What is down payment assistance?

Any grant or loan intended to help homebuyers increase how much they can contribute upfront to the purchase of a home is considered down payment assistance. It may come from a government agency, private lender or other organization.

These programs typically have eligibility requirements and borrowers usually have to take out a mortgage with a participating lender to take advantage of their assistance program.

Who is eligible for down payment assistance?

Many DPA programs are geared toward first-time homebuyers and most require the property to be your primary residence. Some may require the borrower to take a homebuying education course. Other criteria may include:

  • income
  • credit score
  • type of loan
  • property location
  • purchase price

If you're already working with a lender, ask them what options are available to you.

Types of down payment assistance

There are several types of assistance, some of which don't have to be repaid and some of which do.

Grants

DPA grants do not have to be repaid, but they are often limited to first-time homebuyers with low to moderate incomes. They may come from private lenders or federal, state or local government agencies

The Maine State Housing Authority's First Home Loan Program, for example, offers up to $5,000 toward a down payment, closing costs and prepaid escrow expenses for borrowers who meet certain income requirements and take a homebuyer education program before closing.

Freddie Mac has a database of DPA programs across the US.

Many commercial banks have grant programs, too. Bank of America will give qualified borrowers up to 3% of their home's purchase price, up to $10,000, toward a down payment.

Bank of America Home Mortgage Loans

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included

  • Types of loans

    Conventional loans, FHA loans, VA loans, Affordable Loan Solution® mortgage, Doctor loans

  • Terms

    Varies

  • Credit needed

    Conventional loans typically require a 620 credit score

  • Minimum down payment

    3% with Bank of America's Affordable Loan Solution® mortgage loan

  • Terms apply.

  • Offers first-time homebuyer assistance?

    Yes — click here for details

Chase Bank's homebuyer grant offers up to $7,500, which needs to be used to purchase mortgage points. But any remaining funds can be put toward the down payment.

Chase Bank

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included

  • Types of loans

    Conventional loans, FHA loans, VA loans, DreaMaker℠ loans and Jumbo loans

  • Terms

    10 – 30 years

  • Credit needed

    620

  • Minimum down payment

    3% if moving forward with a DreaMaker℠ loan

  • Terms apply.

  • Offers first-time homebuyer assistance?

    Yes — click here for details

Forgivable loans

Many cities, counties and states offer forgivable loans to first-time homebuyers. Provided you stay in your home for a set number of years, you don't have to pay the money back. You may be required to work with a partner lender, however, limiting your ability to shop around.

The New York City Department of Housing Preservation and Development's HomeFirst down payment program provides qualified first-time homebuyers with a forgivable loan of up to $100,000 for a down payment or closing costs. Depending on the loan size, borrowers must use the home as a primary residence for 10 to 15 years to have their debt forgiven.

Your state housing agency website should have details on local programs or you can check Freddie Mac's DPAOne database. 

Low-interest, no-interest and deferred loans

Some DPA programs come in the form of loans with very low or zero interest. Others may allow borrowers to put off repaying the loan until the end of their mortgage term.

The Home Advantage program from the Washington State Housing Finance Commission allows buyers to take out a second mortgage to help with a down payment. The loan has a 0% interest rate and payment is deferred for 30 years.

What if I don't qualify for down payment assistance?

If you don't meet the requirements for down payment assistance, most lenders offer mortgages with low down payment requirements.

Ally Bank's HomeReady loan, for example, only requires 3% down. Applicants must make no more than 80% of the area median income and take a homeownership education course. Ally doesn't charge lender fees, so even if you don't qualify for a HomeReady mortgage, your closing costs could be considerably lower.

Ally Home

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included

  • Types of loans

    Conventional loans, HomeReady loan and Jumbo loans

  • Terms

    15 – 30 years

  • Credit needed

    620

  • Minimum down payment

    3% if moving forward with a HomeReady loan

Terms apply.

SoFi also offers mortgages with 3% down for qualified first-time buyers. Borrowers may also earn a 0.25% rate reduction on a 30-year fixed-rate mortgage and up to $9,500 cash back if they buy their home through SoFi's Real Estate Center.

SoFi

  • Annual Percentage Rate (APR)

    Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included

  • Types of loans

    Conventional loans, jumbo loans, HELOCs

  • Terms

    10 – 30 years

  • Credit needed

    620

  • Minimum down payment

    3%

Terms apply.


Government-backed mortgages like VA loans, USDA loans and FHA loans typically have lower down payment requirements. They also have specific eligibility criteria, however, and the amount of your down payment will vary based on your credit score and other factors.

FAQ

Any program aimed at helping borrowers increase the amount of the purchase price they provide upfront can be considered down payment assistance (DPA). Many banks have DPA programs for their lenders, and there are also offerings from government agencies and nonprofits.

In January 2024, the median down payment was 14.2%, according to real estate data analysis firm ATTOM.

Down payment assistance is typically aimed at first-time or low-income homebuyers but there are programs with broader parameters. Check with your lender to see if there are options available to you.

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Bottom line

Saving up for a down payment can be a major obstacle to homeownership, especially if you're a first-time homebuyer. Since most down payment assistance is limited by lender and loan type, you should look at what's available when you are first shopping for a mortgage.

Why trust CNBC Select?

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every mortgage article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of mortgage productsWhile CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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