By Gene Griffin, Branch Manager, NMLS #2234848 ·
Down payment assistance is money from a grant, a forgivable second loan or a deferred or repayable second loan that covers part or all of your down payment. Programs come from states, counties and cities, and from lending partners that aren't state sponsored. You don't always have to be a first-time buyer to qualify.
Down payment assistance is one of the most underused tools in home buying. A lot of buyers assume they won't qualify or that it's only for first-time buyers. Neither is always true.
The main types
- Grants. Money you don't repay, usually tied to income limits or a minimum time living in the home.
- Forgivable second loans. A second lien that's forgiven over time if you keep the home as your primary residence.
- Deferred or repayable second loans. Repaid when you sell, refinance or pay off the first mortgage, or on a monthly schedule.
Where the programs come from
Some programs are run by states, counties and cities. Others are offered through lending partners and aren't state sponsored at all, which can open the door for buyers who miss a state program's income limit or location rules. As a broker, we can compare both.
Questions to ask before you use it
- Is it a grant or a loan, and when would I repay it?
- Does it change my interest rate or monthly payment?
- What happens if I sell or refinance in the first few years?
- Can it cover closing costs as well as the down payment?
Assistance can be the difference between buying this year and waiting three more. It can also cost more over time, depending on the program. Your advisor should lay out both sides with real numbers before you choose.
This article is general information, not a loan offer or financial advice. Programs and guidelines change; talk with a licensed advisor about your situation.