How down payment assistance works
State housing finance agencies, some cities and a few banks offer help with the down payment and closing costs, mainly for first-time buyers with moderate incomes. The money usually comes as a second loan with no monthly payment that is forgiven over time or repaid when you sell or refinance, and sometimes as a grant.
Common requirements
- First-time buyer status, often defined as not having owned a home in the last three years.
- Household income and purchase price limits, which vary by county.
- A program first mortgage from a participating lender.
- A homebuyer education course.
- Living in the home as your main residence for a set number of years.
Programs in the areas we cover
In New Jersey, the state housing agency offers down payment assistance with an extra amount for first-generation buyers. In New York, the state mortgage agency offers a forgivable down payment loan with its mortgages. In California, the state housing agency offers a deferred second loan and, in some years, a larger shared-appreciation program by lottery. Some cities, including San Francisco, run their own programs. Amounts and availability change, so always confirm on the agency’s site.
An example
A first-time buyer in New York purchasing a $400,000 home with a state agency mortgage might qualify for a forgivable assistance loan of 3% of the price, $12,000, toward the down payment and closing costs.
Things to check before you rely on it
- Whether the program rate on the first mortgage is higher than a regular loan, and what that costs over time.
- How much you’d repay if you sell or refinance early.
- Whether sellers in competitive markets view program financing differently, and how long approval takes.
How to apply
Most programs are reached through a participating lender rather than by applying to the agency directly. Start by asking a lender that offers the state agency’s mortgages whether you qualify, take the homebuyer education course early since it can take a few weeks to schedule, and gather the same documents you’d need for any pre-approval. Apply before you make offers, so your pre-approval letter reflects the assistance.
Questions buyers ask
Do I have to pay down payment assistance back?
Often only if you sell, refinance or move out before a set number of years. Some programs are repaid when you sell regardless, and some are grants.
Can I combine programs?
Sometimes. Program lenders know which can be combined.
Who counts as a first-time buyer?
Usually anyone who hasn’t owned a home in the last three years, though definitions vary by program.