Down Payment Assistance: Grants, Second Loans & How to Qualify

Down payment assistance (DPA) is help — usually from a state or local housing finance agency, or a nonprofit — that covers part or all of your down payment and sometimes your closing costs. It comes in four common forms: outright grants, forgivable second loans (forgiven if you stay long enough), repayable or deferred second loans, and mortgage credit certificates that give you a federal tax credit. You still get a regular first mortgage (FHA, conventional, VA, or USDA); the assistance sits on top of it.

It depends on the type. Grants don't have to be repaid. Forgivable second loans are forgiven over time — often after you live in the home for a set number of years — but you may owe part of it back if you sell or refinance early. Deferred and repayable seconds do have to be paid back, either monthly or when you sell, refinance, or pay off the first mortgage. Always read the specific program's terms, because the repayment rules are the whole point.

Most programs cap eligibility by household income, usually expressed as a percentage of the area median income (AMI) for the county — so the exact dollar limit depends on where you're buying and your household size. Many programs also set a maximum purchase price. Because these limits are set per program and updated regularly, check your state housing finance agency's current numbers rather than assuming a national figure.

Yes. Down payment assistance is designed to pair with a standard first mortgage, and FHA is one of the most common pairings — DPA can cover some or all of FHA's 3.5% down payment. Many programs also work with conventional, VA, and USDA loans. The specific combinations allowed depend on the program, so confirm which first mortgages your chosen assistance program permits.

A true grant does not have to be repaid, so in that sense yes. But 'grant' is sometimes used loosely to describe a forgivable second loan that only becomes free if you stay in the home long enough — sell or refinance early and you may repay part of it. Read whether the assistance is a grant, a forgivable loan, or a repayable loan before assuming it's free. Legitimate assistance also typically requires a homebuyer education course and meeting income limits.

A forgivable second loan is assistance structured as a second mortgage that is gradually forgiven the longer you own and live in the home — for example, forgiven fully after a set number of years, with no monthly payment in the meantime. If you sell or refinance before the forgiveness period ends, you typically repay the unforgiven portion. It behaves like a grant if you stay, and like a loan if you leave early.

Assistance programs generally follow the credit requirements of your first mortgage plus their own minimum, which is often around 620–640. In practice your score has to satisfy both the loan (for example, 580 for FHA or 620 for conventional) and the assistance program's floor. Some programs set a higher minimum in exchange for the help, so check both thresholds.

Start with your state housing finance agency (HFA) — every state has one, and they administer most first-time-buyer loans and assistance. HUD also maintains a directory of local homebuying programs by state, and a HUD-approved housing counselor can point you to options at low or no cost. You apply through a participating lender, usually alongside your mortgage application, and most programs require a homebuyer education course.