Do you wish you could buy a house? With the cost of homes today, it can be difficult to save enough for a down payment.
However, many people are unaware that there are countless programs that offer grants or loans to help home buyers raise the funds they need. “There are tons of programs that support them,” said Deatra Kemp, a first-time homebuyer advocate in Milwaukee.
The programs can alleviate some of the scary numbers involved in home buying. The average price of a home has risen to over $400,000, meaning the once-traditional 20 percent down payment — an amount paid in cash when purchasing a home in addition to the amount borrowed on a mortgage — is about $80,000 would be US dollars. And in some parts of the country, typical real estate prices are significantly higher.
Even a 5 to 10 percent decline is far-fetched because rising rents have made it harder for people to save to buy a home, said Teig Whaley-Smith, executive director of the Community Development Alliance, a nonprofit group in Milwaukee that focuses on advocating for affordable homeownership is a path to racial justice. “For working families,” he said, “this is almost impossible.”
Rising mortgage interest rates, which drive up monthly costs, don't help either. This week, interest rates on a 30-year fixed-rate mortgage rose above 7 percent for the first time since May — to an average of 7.04 percent — according to Freddie Mac, the government-backed mortgage financing giant.
Sonu Mittal, senior vice president and head of single-family home purchases at Freddie Mac, said that aside from high prices and interest rates that consumers can't control, increasing a down payment “remains the biggest barrier to homeownership.”
But down payment assistance options can help buyers come up with the money they need. Combined with loan programs that allow buyers to put down less money — in some cases as little as 3 percent of the home's purchase price — the assistance can make buying a home a reality.
In some cases it is also possible not to deposit any money. Two federal government programs offer zero percent down payment loans to borrowers who meet certain criteria. The Department of Veterans Affairs offers full financing for veterans and those on active military duty, and the Department of Agriculture guarantees zero percent down payment loans in rural areas.
“Twenty percent less is a myth,” Ms. Kemp said. According to the National Association of Realtors, the typical down payment for first-time buyers in 2024 was 9 percent. However, the idea that higher down payments are necessary still persists. As a result, many people of modest means don't even consider the idea of owning a home, said Ms. Kemp, vice president of programs at Acts Housing, a nonprofit group that provides financial coaching and other services to help renters become homeowners .
However, it is not easy to find the right utility program. A 2023 report by the Urban Institute, a nonprofit research group, identified more than 1,600 government programs across the country designed to help with down payments. Some are offered by the federal government, others by state housing finance agencies or county and local governments. Community-funded organizations and even commercial lenders can also offer help.
Most, but not all, programs are aimed at first-time buyers, and most set income limits for borrowers – typically based on the average income in the area where the home is located. The dizzying array of programs with varying criteria and geographic restrictions can make it difficult to find and apply for available help.
“Homebuyers don’t know where to start,” said Ashley Moore, community lending manager at Chase Home Lending in Houston.
Some programs offer grants that don't have to be repaid, but most offer help in the form of a low-interest or no-interest second mortgage, which means additional debt on the home. However, payments on the loans are often deferred, so you don't have to start repaying them right away, and the loans may be forgiven if you stay in the home for a certain period of time – often five years.
Jung Hyun Choi, a senior research fellow at the Urban Institute's Center for Housing Finance Policy, said borrowers can combine the benefits of several different down payment programs, a practice sometimes called “stacking,” to come up with the funds they need. However, it can take time and effort to find and apply to different programs. “It’s pretty complicated,” she said, and can drag out the buying process.
Groups like Acts Housing want to help borrowers find the right programs and often find that borrowers qualify for more than one. “We love to stack,” Ms. Kemp said.
Acts Housing recently worked with a buyer who was able to receive $19,500 in down payment assistance through a combination of grants from federal and private lenders and a city program, she said. The buyer paid less than $700 out of pocket when purchasing a home in Milwaukee.
“Get all the grants you deserve,” Ms. Kemp said. “Don’t leave money on the table.”
The borrower, Latoya Myrick, 44, who works in community services, said the aid enabled her to buy a duplex for about $200,000, fulfilling her longtime goal of owning her own home. She had tried before, she said, but didn't have enough for a down payment. She closed on January 6th and will be moving in soon. “I'm so grateful.”
More resources are emerging to help homebuyers find down payment assistance. Freddie Mac began offering a free online search tool, DPA One, in late 2023 to help lenders and housing advisors match qualified borrowers with down payment assistance.
“Loan officers may not even know a program exists,” Mr. Mittal said. “We want to make sure we don’t miss these opportunities.”
It's too early to say how many homes have been purchased because of the new offer, Mittal said, but the tool is gaining traction. About 7,000 loan officers use the tool, which now includes information on about 800 programs in 50 states and the District of Columbia. (Homebuyers can try DPA One, but it's primarily intended for professionals.)
Another option is Down Payment Resource, an online search tool. Borrowers enter information about themselves and the type of home they want and can learn about programs they may be eligible for.
You can also contact your state housing finance agency or work with a housing agency certified by the federal Department of Housing and Urban Development to learn more about available programs. You can search for agencies near you on the HUD website.
Here you will find questions and answers about mortgage down payments:
Will using a down payment assistance program cause the interest rate on my loan to be higher?
Some predatory lenders may charge borrowers who take advantage of relief programs a higher interest rate, Ms. Kemp said. When that happens, advisors from certified real estate agencies can work with buyers to find lenders who won't penalize borrowers with down payment assistance, she said.
Can I make a down payment with a family donation?
Lenders may allow gifts from close family members to be included in the down payment. According to the National Association of Realtors, in 2024, 8 percent of home buyers (and 21 percent of first-time buyers) said they took advantage of a gift from a relative or friend. According to credit bureau Experian, you may need to provide a letter signed by the donor to prove that the money does not need to be repaid.
Do private lenders offer down payment assistance?
Some do. Chase, for example, offers grants of up to $7,500 in eligible areas, including federally qualified neighborhoods with a majority Black, Hispanic or Latino population, that can be used toward a down payment or to reduce the interest rate or closing costs of a home loan. You can search for available programs online.