The Ultimate Guide to Down Payment Assistance

Get Down Payment Assistance FAST With This Ultimate Guide

( – Many people who want to buy their first house think there’s no way they can ever afford to become homeowners because it takes so much money for a down payment. There’s a common misconception that a buyer needs to have 20% of the purchase price saved up, plus the money they’ll need to for the mortgage.

The reality is quite different. A first-time homebuyer only needs as little as 3% of the purchase price saved up. There are several ways to buy a home with only a little bit of money saved up. If other factors, such as income and credit history, are strong, then a prospective buyer may qualify for down payment assistance in the form of grants, federal loans, and the Chenoa fund.


Prospective homeowners who meet certain eligibility requirements can qualify for down-payment assistance (DPA) grants. This is basically free money that can be used for your down payment, or in some cases, your mortgage closing costs, too. State and local agencies fund these grants, and the amount a homebuyer can qualify for varies depending on the program and the Zip code. In some areas, homebuyers can get thousands in grants, while in others there is no money available. The easiest way to find out the grant programs in your area is to simply Google something like ” Homebuyer grants in Whatever County or state”. If a buyer has already started working with a mortgage lender, ask the lender about local grant programs. Some employers offer a DPA program, ask yours if that’s a benefit.

Federal Loans

The federal government has an array of loan programs that require very low down payments, or even 100 % financing.

FHA Loans

First-time buyers with at least a 600 credit score can qualify for an FHA loan, which has a 3.5% minimum down payment. Down payment or closing cost funds may also be gifted with FHA loans, as long as the gift meets certain criteria—it’s a true gift and there is no repayment expected.

VA Loans

US military veterans and surviving spouses can also buy homes with no money down through the Veteran’s Administration mortgage program. The VA backs the loans that mortgage companies make to veterans, but they don’t lend money directly. Closing costs are usually lower with a VA loan, and eligible buyers don’t have to pay the VA funding fee.

USDA Loans

Buyers with less than great credit and limited down payment money can still buy a house through the US Department of Agriculture (USDA). The only requirement is that the buyer find a home in a rural area. You can go to the USDA Loans website to find out the designated areas in your state.

Conventional Loans

First-time buyers with high credit scores and plenty of income can finance a home with either a conventional Fannie Mae loan, or a special low-to-no-money down mortgage.

Conventional 95 or 97 Loans

Some buyers prefer a conventional loan to a government-backed loan. Fannie Mae allows some flexibility with down payments, from gifts to grants to second mortgages that provide the down payment and closing costs.

HomeReady Loans

Conventional—private–lenders offer 3% down payment loans for first-time homebuyers through the Fannie Mae HomeReady program. Buyers can use grant or gift money for home-buying costs.

Chenoa Fund

The CBC Mortgage Agency offers Chenoa fund loans to first-time homebuyers with low to moderate incomes. CBC’s mission is to increase home ownership in diverse communities, in every state in the US except New York. Buyers who get Chenoa funds for DPA or closing costs also get 18 months of counseling after they’ve bought the home to ensure they stay on the right track financially.

Chenoa funds are used for  FHA mortgages and provide up to 5% of DPA, and buyers can use the money for any costs associated with the mortgage.

The Bottom Line

Mortgage companies realize that high down payments are a significant barrier to home ownership for many Americans, and are working to provide assistance in several forms to help more people get into homes of their own.

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