Published:
February 25, 2025

Down Payment Assistance Programs: What to know

What is down payment assistance?

While conventional loans offered to first-time buyers have very low down payment requirements (as low as 3% down), some buyers still might need help coming up with the cash… enter down payment assistance.

The most traditional type of down payment assistance are programs offered by local, state, and federal government authorities. There are over 2,000 DPA programs nationwide, available in every state. Most DPA programs’ mission is to help lower income households afford homeownership and break the rent cycle. They can be incredibly powerful and life changing for the right people. 

Private companies are also beginning to offer down payment assistance. Crib Equity offers down payment assistance in exchange for equity. These are typically straight-forward and flexible, with benefits like using your own lender and buying back the equity at any point in the future. These are not loans, which means you won't have any extra monthly payments to worry about. Think of it like having a rich aunt or uncle giving you some money for a down payment.

The third type of down payment assistance is co-buying with friends or family. This is actually the most straightforward and often the easiest to utilize. Co-buying offers all of the benefits of down payment assistance programs without the need to qualify, wait for, and be limited by restrictions. It is becoming so popular, many lenders and real estate agents already have products and services specifically for co-buy groups, making the home buying process seamless, regardless who you are buying with.

Who offers down payment assistance?

  • Non-profit organizations
  • Banks
  • Government  (Local, state, federal)
  • Private companies (Crib Equity)
  • Co-buying (Buy with friends and family)

Do you qualify for down payment assistance programs?

Area Median Income (AMI) 💵

Not all DPA programs are created equal or are intended to help the same demographic of home buyers. In general though, most programs are targeted towards lower income buyers. You will want to look at a program’s requirement for “area median income,” commonly referred to as AMI. Typically your AMI will need to be under a certain amount. If your income is too high for your area, you probably won’t qualify. 

Credit score 📈

Additionally, in most scenarios, programs will require you to have a minimum credit score to qualify for DPA. This is sometimes dependent on your AMI, but a general rule of thumb is having a credit score of at least 620.

Loan approval must also be obtained, using the normal hurdles: Income documentation, suitable appraisal, and sufficient post closing funds.

Type of Property 🏠

Normally, it has to be your primary residence. Typically, it's a single family residence but almost all down payment assistance programs allow for the purchase of condos. In addition, nearly 30 percent of these special programs also cover people acquiring a duplex, a triplex and even a four-plex. 

Different qualifying requirements for each program🔮

Remember that not all DPA programs are created equal, and have different qualifications. You will want to work with a lender to really understand which one is not only right for you, but also available to you depending on your finances and circumstances.

Are you required to go through courses or seminars?

Some DPA programs require you to attend a seminar or go through a course as one of their requirements. The length and time requirement can vary, so you’ll want to make sure you can fit this into your schedule. 

Do you pay back the down payment?

Some DPAs require you to pay back the down payment overtime in the form of low interest loan payments, while others are forgivable loans or grants that do not require you to pay them back. Most DPAs will explicitly state what type of assistance they offer. If they don’t, just ask :) 

Types of down payment assistance:

  • Forgivable: Buyers do not pay back the down payment if they meet certain requirements over time. Example: Forgivable after 5 years of home life.
  • Grant: This is typically a gift you do not pay back.
  • Low interest: These down payments are paid back at a low interest rate over time, just like a normal loan.
  • Deferred payment: These down payments are paid back, but typically not until a later time, like when the home is eventually sold.

How long does it take to get approved and receive funds?

Depending on the program and its requirements, this can be a relatively long process ranging from weeks to months. Compare this with getting pre-approved for a conventional loan from a lender, which can be done in a day or two.

Considerations when thinking about down payment assistance programs.

  • The time to qualify and secure down payment can be long.
  • Can add complexity to the closing process and extend time.
  • Lenders do not work with all DPAs. This might reduce your lender pool.
  • Certain types add extra payments to your plate in the future in addition to your mortgage.
  • Restrictions often apply to credit score, income, etc.
  • Depending on the market, these can be competitive. 

How do you find the right down payment assistance program?

Great question! Because there are so many types of organizations that offer down payment assistance of different kinds, with different qualifications, across the country, you will need to do some research. 

Fortunately, there is a fantastic database you can use: https://downpaymentresource.com/are-you-eligible/

Should you contact a lender first? Or a down payment assistance program first?

You should absolutely contact a lender first. Lenders only support specific DPA programs. Starting with a lender also gives you the benefit of them helping you navigate program specifics and answering any of your questions along the way.

Should you co-buy with friends or family to increase your down payment?

We have been helping friends and family co-buy homes for over 5 years and seen the incredible impact it has on making homeownership possible. Yes, there are considerations you should think about, and we can help you understand them. We will also help align your group, create an operating agreement, and connect you with lenders who have experience and services specifically designed to help groups. Our ecosystem of partners is designed for co-buyers.

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Talk to us about your down payment assistance options🤠

Nestment, Inc. does not guarantee and is in no way responsible for the accuracy of information provided in this blog post. All information is provided “AS IS” and with all faults. Data presented here may not reflect all real estate activity in the market.  While the information on this site is about legal and tax issues, it is not intended as legal or tax advice or as a substitute for the particularized advice of your own attorney and tax professional.

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