Down Payment Assistance for First-Time Buyers: The Ultimate Guide

The 2024 FHA Loan Handbook

Some first-time home buyers struggle to come up with the funds needed for a down payment, even though they’re well qualified in other areas. In these situations, a down payment assistance (DPA) program might be able to help.

Article overview: This guide explains what down payment assistance programs are, the different types that are available, and what you might need to qualify for one.

Why Some Buyers Struggle With Down Payments

The down payment is the amount you invest in your home purchase up front. You pay it at closing, which is the final stage in the buying process. The minimum amount can vary based on the type of loan and other factors.

Even at the lowest investment threshold for a conventional loan (3%), the down payment could add up to a substantial sum of money. This is why many first-time home buyers across the U.S. look for some kind of upfront assistance when buying a house.

According to a report from the National Association of Realtors:

“Saving for a down payment is the biggest obstacle to homeownership that first-time home buyers cite, and they’re looking for financial help. Twenty-two percent of first-time buyers have used a gift or loan from friends and family to come up with a down payment, according to the NAR study. The typical down payment for first-time buyers was 6%…”

Types of Down Payment Assistance Programs

The first thing you should know is that down payment assistance programs are highly variable. They’re the financial equivalent of snowflakes, in the sense that no two are identical.

Down payment assistance overview graphic

Down payment assistance can come in many forms, so the specific requirements can vary quite a bit from one program to the next. Here are the most common types:

1. Grants

A grant is basically free money that never has to be repaid. In a typical grant program, a governmental agency and/or non-profit organization will provide funds to help a home buyer cover some or all of the down payment.

2. Specialty Loans

Some down payment assistance programs offer loans with favorable terms, such as low-interest rates or deferred payments. These loans can help buyers bridge the gap between their available funds and the required down payment amount. They might be forgivable over time or require repayment after a certain period.

3. Forgivable Loans

These loans are forgiven or erased after a certain number of years (often five to seven years), with the homeowner making regular payments in the meantime. So it starts out as a loan but turns into a grant once the debt is forgiven.

This list is not exhaustive. These are the most common types of assistance for first-time home buyers, but you might have other options available to you. It requires research.

5 Important Details You Need to Know About

When researching a specific DPA program, pay particular attention to the following:

  • Eligibility requirements: These typically include income limits, residency requirements, and first-time home buyer status. But the term “first-time buyer” can be fairly broad.
  • Program type: Is it a grant that doesn’t need to be repaid, or a loan that needs to be repaid with interest? Is it forgivable after a few years, or do you have to repay it in full?
  • Loan terms (if applicable): If it’s a loan, what is the interest rate, repayment term, and any fees associated with the program?
  • Education requirements: Some programs require home buyers to complete a homeownership education course from an approved provider.
  • Funding availability: Some programs have limited funding and may have a waiting list or application deadlines. These can be highly competitive, so you have to move quickly.

Common Eligibility Requirements for DPA Programs

While the details of these programs can vary from one to the next, they often include the same general requirements for home buyers. Here’s a rundown of those common requirements.

1. First-Time Home Buyer

Some programs require applicants to be first-time home buyers, which usually means not having owned a home in the past three years. This aims to help those entering the housing market for the first time.

2. Income Limits

DPA programs usually have income limits that are based on the area median income (AMI) for a particular city or county. This ensures that the assistance goes to low- and moderate-income borrowers who need it most. Many down payment assistance programs limit the income to 80% of the local AMI, while others might go up to 115% or even higher.

3. Purchase Price Limits

DPAs often limit the purchase price of the home, and for similar reasons as the income limits mentioned above. These programs are generally designed to help buyers purchase modestly priced homes, rather than high-end luxury properties.

4. Geographic Restrictions

Most of the down payment assistance programs available today are offered to home buyers who live in a particular city, county or state. It’s rare to find a DPA offered at the national level, for buyers all across the country. So you’ll need to research locally when seeking this kind of assistance.

5. Primary Residence

In nearly all cases, the home being purchased with down payment assistance must serve as the buyer’s primary residence. In this context, a primary residence is a home where you live for most of the year. It’s your “legal domicile.” Vacation, rental and investment properties usually do not qualify for standard DPA programs.

6. Education Classes

Many down payment assistance programs require home buyers to receive some form of counseling or training from an approved counselor or agency. The training usually covers some combination of mortgage finance and home buying topics. Training sessions are often brief and, in many cases, can be completed within a few hours.

7. Credit Scores

Some DPA programs have minimum credit score requirements for home buyers, often in the 620-or-higher range. Credit scores show how a person has borrowed and repaid money (or used credit) in the past. Implementing a minimum score can help reduce risk and ensure that the funds are going to financially responsible borrowers.

8. Debt-to-Income Ratio (DTI)

Some programs limit the home buyer’s DTI ratio to make sure they are not taking on too much debt with the addition of a mortgage payment. Many assistance programs limit the overall debt-to-income ratio somewhere within the 45% to 50% range. But like all of these requirements, debt limits can vary from one DPA to the next.

9. Additional Requirements

Some programs may have additional requirements like specific occupations (teachers, first responders, nurses), military service, or being a resident of a particular area for a certain amount of time.

The Definition of a ‘First-Time’ Buyer Can Vary

A lot of down payment assistance programs are limited to first-time home buyers, while others are broader in nature. But the exact definition of a “first-time” buyer can vary from one DPA initiative to the next.

  • In some cases, eligibility might be limited to people who have never owned a home in the past.
  • More commonly, assistance might be offered to people who haven’t owned a home within the last three years.

So the precise definition of a first-time buyer might be narrow or broad, depending on the agency that is offering the program. This is one of the key requirements you’ll have to look into, when researching your options.

Real-World Example: HOME+PLUS in Arizona

The Arizona Public Housing Authority (APHA) is a government agency dedicated to affordable housing and community revitalization efforts within the state of Arizona. They offer a number of housing initiatives, including a down payment assistance program called “HOME+PLUS.”

According to the APHA website, HOME+PLUS “provides a 30-year fixed-rate mortgage combined with up to 4% down payment assistance (DPA) depending upon the new underlying first mortgage.”

With this program, eligible home buyers can use the DPA funds to cover the down payment, the closing costs, or a combination of the two.

Key requirements for this program (as of 2024) include the following:

  • It’s available to home buyers statewide, in all Arizona cities or counties.
  • The borrower’s annual income should not exceed $136,609.
  • One borrower must complete a home buyer education course before closing.
  • It requires a credit score of at least 640 and a DTI ratio no higher than 50%.

This program includes some of the most common requirements mentioned earlier. It’s geared toward home buyers within a certain income bracket. It has geographical limitations. And it requires the borrower to complete an approved educational course.

How to Find Down Payment Assistance Programs

Down payment assistance programs usually exist at the local level, either within a certain city, county or state. So if you need help overcoming the upfront investment associated with a home purchase, you’ll want to look for DPA initiatives available in your area.

Here are some tips for finding applicable DPA programs:

  1. Contact your HFA. Every state has a Housing Finance Agency (HFA) that administers or lists available down payment assistance programs. Visit their website or call them to find out what kind of programs they offer for first-time home buyers.
  2. Google it. You can find local programs available for your area by searching the name of your city, county or state (separately) followed by “down payment assistance” or “home buying programs.”
  3. Online search tools. You could also use the Down Payment Resource website ( or the HUD website ( to search for programs based on your location and eligibility criteria.
  4. Ask your agent. Experienced real estate agents often know about local programs and the specific requirements they have for home buyers.

You might also be able to find local DPA programs through the state-by-state list created by HUD and located here:

Another Option: Gift Money From a Third Party

When people mention a “down payment assistance program,” they are usually referring to the grants and/or second mortgages covered above.

But there’s another form of help that can be equally helpful, and a lot of first-time home buyers don’t even know it exists. This is the down payment gift.

These days, most mortgage programs allow buyers to receive funds donated from a third party. These funds can be used for the down payment and, in some cases, the closing costs.

The list of approved donors varies based on the type of home loan you’re using, but it’s generally a broad category. For example, some mortgage programs allow funds to be provided by close friends, family members, employers, or nonprofit organizations.

But in all cases, the person donating the funds must also provide a letter stating that they do not expect any repayment. In other words, the money being provided must truly be a gift, and not a short-term loan from one person to another.

Disclaimer: This guide mentions specific DPA programs and other resources to help readers understand the subject matter. But we do not represent or endorse those third-party resources, nor are we associated with them. Home buyers should conduct due diligence before contacting any third parties offering down payment assistance. 

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Brandon Cornett

Brandon Cornett is a veteran real estate market analyst, reporter, and creator of the Home Buying Institute. He has been covering the U.S. real estate market for more than 15 years. About the author