Jan 25, 2017

Pulling together enough money for a down payment may be a challenge. But you might not have to go it alone – many state, county, and city governments offer financial assistance to people in their communities who are well qualified and ready for homeownership. Requirements vary, but if you're eligible you could receive down payment assistance ranging from a few thousand dollars to larger amounts, depending on your needs, your qualifications, and where the home is located.

The three main types of down payment assistance are grants, second mortgage loans, and tax credits.

  • Grants – Grants are funds that you do not have to pay back as long as you own and occupy your home for a certain period of time.
  • Second mortgage loans – The most common down payment source, many second mortgage loans offered by state and local governments have low or zero interest rates, and the payments are deferred over a specified time span and, in many cases, the loan is completely forgiven over time.
  • Tax credits – Certain states and local governments, including housing finance agencies, issue mortgage credit certificates, which reduce the amount of federal income tax you pay. This makes more money available upfront for your down payment or closing costs.

Depending on the program, assistance may be limited to first-time homebuyers and/or low- and moderate-income homebuyers. And homebuyer education counseling may be required, which would be helpful in any case.