First-time home buyer grants can help with your down payment and often your closing costs, too. Every state offers some form of home buyer assistance — but most borrowers don’t even realize it’s available.
First-time home buyers could be in line for thousands of dollars in grant money if they qualify. However, the amount and type of assistance vary a lot by program. So explore all your options and make sure you’re leveraging the best homeownership grants available to you.
In this article (Skip to. )
Nearly every state operates its own down payment assistance program, typically overseen by a housing finance agency or government entity.
Every program gets to set its own rules. So the amount you can receive, whether or not it needs to be repaid, and eligibility guidelines will vary hugely depending on where you want to buy a home.
A number of states (and some county or city governments) offer outright grants that you never have to repay. The grant amount may vary, ranging from a few thousand dollars to as much as 3% to 5% of your home’s purchase price. The specific amount hinges on the location of your home purchase.
Some states also provide forgivable home loans. These are typically “silent” mortgages, meaning they have no monthly payments and a 0% annual percentage rate. After a number of years (often 5-10), the loan is fully forgiven. But if you move, sell the home, or refinance before that time is up, you’ll have to repay at least a portion of what you received.
While not all state governments provide homebuyer grants, many do offer the option of repayable down payment loans. You borrow a certain amount and repay it in equal installments over time; for example, over 10 years in parallel with your main mortgage.
The interest rate on these loans is typically very low. And your lender will ensure you can comfortably afford the second mortgage on top of your main mortgage and other debts.
The National Homebuyers Fund (NHF) is a nationwide home buyer assistance program. It provides grants or three-year forgivable loans to first-time buyers and others purchasing or refinancing a home. You can usually receive up to 5% of your mortgage loan amount, and the assistance can be paired with a conventional, FHA, VA, or USDA mortgage.
You can call (866) 643-4968 to learn more and find a participating lender, or start with the NHF’s website.
The Chenoa Fund is a nationwide down payment assistance program to first-time buyers. This takes the form of a three-year, silent, forgivable loan rather than an outright grant. Chenoa Fund also offers installment loans, which need to be repaid in parallel with your primary mortgage.
FHA loan or a 3%-down conforming mortgage.
Here are the main eligibility criteria for Chenoa’s forgivable loans:
Chenoa’s loans are fully forgivable after 36 consecutive, on-time payments on the FHA first mortgage. The forgiveness period resets if the borrower makes a late payment, but the borrower has the full 30-year term to meet the forgiveness conditions. This loan may also be forgiven at the end of the 30-year term if the previous forgiveness condition has not been met.
If you can’t get a forgivable loan, you might still find that Chenoa Fund’s repayable loan offers a better deal than your state’s program. But explore all your options. You can call (866) 563-3507 or visit the Chenoa Fund website to learn more.
Fannie Mae’s Community Seconds isn’t a grant or forgivable loan. But it’s a very generous mortgage loan program that can cover your entire purchase cost: the home, your down payment, your closing costs, and even some home improvements. Altogether, Community Seconds lets you finance up to 105% of the home price using a single, low-rate mortgage.
Fannie Mae HomeReady loan to be eligible. And you typically must have:
However, you may be able to get a Community Seconds loan through a local program that has different, sometimes easier, eligibility criteria. Ask your mortgage lender for details.
Freddie Mac’s Affordable Seconds program is a lot like Fannie Mae’s Community Seconds. It lets you borrow up to 105% of the sales price, in total, to cover your home purchase, down payment, and closing costs.
Home Possible mortgage loan. These allow just 3% down but have a slightly higher minimum credit score eligibility requirement of 660.
Community Seconds and Affordable seconds are very similar programs — as are the HomeReady and Home Possible mortgages with which they’re paired. So have your lender explain both options and compare terms to see which one works best for you.
The US Department of Housing and Urban Development (HUD) runs the Good Neighbor Next Door program. HUD’s website explains the concept:
HUD home for the 50% discount to apply; these are foreclosed homes previously financed by FHA loans. And they must be located in designated “revitalization areas,” which tend to be struggling neighborhoods.
Still, if you’re in an eligible profession and your area qualifies for the Good Neighbor Next Door program, that 50% discount should be irresistible.
Home buyers with a disability — or caretakers buying a home with or for their disabled relative — may be eligible for special assistance programs.
You should also be aware that disability income may help you get a home loan. Properly documented income from government disability programs and your state’s Medicaid program will typically count when you apply for a mortgage. In other words, you can include those sources when you declare your total income to a lender.
Several private-sector lenders offer first-time home buyer grants, some of which may offer additional perks like reduced private mortgage insurance (PMI). These initiatives help low-income or otherwise disadvantaged home buyers. To give a few examples, these include:
Many home buyers are wondering about the Downpayment Toward Equity Act of 2021. According to the National Council of State Housing Agencies, this is an initiative to “establish a grant program to provide down payment and other home purchase assistance to underserved home buyers.” If passed, it could offer up to $25,000 in assistance to eligible borrowers.
Downpayment Toward Equity Act is not law yet, although it has been reaffirmed in President Biden’s 2024 Fiscal Year budget proposal.
Requirements for a first-time home buyer grant usually mirror home loan requirements. You can typically expect to need:
Furthermore, it’s important to note that first-time home buyer grants usually impose income and purchase price limits. Household income limits are often capped at around 80%-120% of the area median income (AMI).
As for the purchase price limits, these tend to vary by ZIP code and are published by the agency offering your assistance program.
Finally, many first-time home buyer grants require you to take a homebuyer education course. These are often offered online and may be free, although some cost around $100.
It’s probably best to start with your state, city, or county’s housing finance agency. But you can also talk to your Realtor or mortgage lender. An experienced mortgage professional should be able to recommend local assistance programs for which you may be eligible. Ready to get started?
Authored By: Peter Warden The Mortgage Reports EditorPeter Warden has been writing for a decade about mortgages, personal finance, credit cards, and insurance. His work has appeared across a wide range of media. He lives in a small town with his partner of 25 years.
Updated By: Aleksandra Kadzielawski The Mortgage Reports EditorAleksandra is the Senior Editor at The Mortgage Reports, where she brings 10 years of experience in mortgage and real estate to help consumers discover the right path to homeownership. Aleksandra received a bachelor’s degree from DePaul University. She is also a licensed real estate agent and a member of the National Association of Realtors (NAR).