Down payment assistance, defined
Down payment assistance is financial help — a grant or a second loan — that reduces the cash you need to buy a home. Most programs are run by state housing finance agencies, with additional programs from cities, counties, and nonprofits. The funds are usually paid at closing directly toward your down payment and/or closing costs.
DPA doesn't replace your mortgage. In most cases it's paired with a first mortgage — FHA, VA, USDA, or conventional — that meets the program's requirements, originated by a participating lender.
The main types of down payment assistance
| Type | How it works | Do you repay it? |
|---|---|---|
| Grant | A gift of funds for down payment or closing costs. | Usually no, though some grants have conditions. |
| Forgivable loan | A second loan that's forgiven over time if you keep living in the home. | Only if you sell, refinance, or move out before the forgiveness period ends. |
| Deferred-payment loan | An interest-free or low-rate second loan with no monthly payment. | Yes — when you sell, refinance, or pay off the first mortgage. |
| Repayable second loan | A second loan with its own monthly payment. | Yes, monthly, usually over 10–30 years. |
| Mortgage Credit Certificate (MCC) | A federal tax credit for part of the mortgage interest you pay each year. | Not a loan; availability varies by state. |
Learn more in grants vs forgivable loans.
Who down payment assistance is for
Many programs target first-time homebuyers — often defined as someone who hasn't owned a primary residence in the past three years — but plenty of programs are open to repeat buyers too. Most set income limits and purchase price limits, require the home to be your primary residence, and require a homebuyer education course.
See how to qualify and how income limits work.
How DPA works in the buying process
- Get pre-approved with a participating lenderYour lender checks which programs you qualify for and pairs them with the right first mortgage.
- Complete homebuyer educationMany programs require an approved course before closing.
- Make an offerYour pre-approval shows the seller you have financing in place, including assistance.
- Program reviewThe program agency may review your file in addition to the lender's underwriting.
- CloseAssistance funds are applied at closing toward your down payment and costs.
Tradeoffs to understand
- Rate and fees. Some DPA programs come with a slightly higher first-mortgage rate than a loan without assistance. Compare the total cost.
- Second lien. Loan-based assistance is recorded against your home and must be repaid under certain conditions.
- Funding windows. Some programs have limited funds and pause when money runs out.
- Recapture tax. Some bond-financed programs can trigger a federal recapture tax if you sell within the first nine years and your income rose significantly. Ask your lender whether it applies.
Find programs in your state
Texas
Statewide programs overview
California
Statewide programs overview
Florida
Statewide programs overview
Colorado
Statewide programs overview
Nevada
Statewide programs overview
North Carolina
Statewide programs overview
Michigan
Statewide programs overview
Maryland
Statewide programs overview
Minnesota
Statewide programs overview