Real Estate

Down Payment Assistance Programs for First Time Home Buyers

By Tom Burchnell
Down Payment Assistance Programs

If you’re thinking of buying your first home, the down payment might seem to be a daunting prospect. Many home loans will require that you put down 20% of the home’s purchase price in order to close the deal. Saving that much can seem out of reach (or like it will take forever, at least). However, there may be down payment assistance programs out there that can help you cover the down payment on your first home, plus there are certain loan programs that offer low down payments.

FHA Loans

FHA loans are some of the most commonly sought out down payment assistance programs for low and middle-income families.

  • Offers better terms than most conventional loans, especially for less qualified applicants
  • The property must be in good repair or the seller must be willing to fix problems before closing
  • Down payments as low as 3.5%
  • May qualify with a credit score as low as 500
  • Intended for relatively modest homes
  • Must pay upfront and yearly mortgage insurance premiums
  • Fixed interest rate
  • Down payment may be gifted from a family member or may come from a down payment grant program.
  • FHA 203(k) program allows for FHA loans on fixer-uppers.

Good Neighbor Next Door

This is a program that aims to help people who serve their communities for a living (teachers, police officers, firefighters, etc.) purchase affordable homes.

  • Backed by HUD
  • Participants must agree to live in the home for 3 years as their primary residence.
  • Only homes in ‘revitalization areas’ are eligible; only homes offered through the program qualify.
  • Participants get a 50% discount on the cost of eligible homes.
  • To qualify for the program, you must work full-time in service to your community.

USDA Rural Development Loans

This is a government-backed loan program for people in rural areas that offers no down payment, though there are other expenses associated with getting a USDA rural development home loan.

  • ‘Rural’ property doesn’t necessarily mean a farm or ranch. It refers to areas with properties in areas with low populations. You can check to see if a property is eligible by typing in the address here.
  • You’ll need to meet income limits determined by state and family size; USDA loans are only available to families with lower incomes.
  • May qualify with less than stellar credit.
  • Applicants with a credit score of 640+ can streamline the qualification process.
  • No down payment, but the buyer is responsible for some expenses (appraisal, etc.)
  • Properties must generally be in good repair, and meet FHA property guidelines

VA Loans

This is a down payment assistance program designed to help those who serve our country in the armed forces (and their surviving spouses) to purchase a home.

  • No down payment
  • Favorable terms compared to traditional mortgages per qualifications
  • No PMI
  • No minimum credit score

Freddie Mac/Fannie Mae

These are both government-sponsored entities that help banks provide low to middle-income families with mortgages that they can afford.

  • Down payments as low as 3%
  • Homeowner education offered through Fannie Mae
  • Buy and secure mortgages so lenders have more lending capacity

Many down payment assistance programs are location-specific, so you’ll have to find a program that will work for you. Many cities even offer their own down payment assistance programs. Check in with local and state housing authorities to see if there is anything like that available and if you qualify.

Key Takeaways

If you’re looking to buy your first home, don’t be discouraged by the down payment requirements. With the right research and by consulting a financial advisor, you can learn all there is to know about the down payment assistance programs available to you so you can be that much closer to securing your dream home.

Down Payment
First Time Home Buyer
Tom Burchnell
Written by Tom Burchnell
Director of Product Marketing

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