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Many renters run the numbers and realize the cost of a monthly mortgage payment can be comparable to rent. The bigger homeownership hurdle? Often, it’s the down payment.

You might be surprised to learn that there are down payment assistance (DPA) programs out there designed to help people who can afford a mortgage payment, but don’t have quite enough saved for a down payment.

How much do I need for a down payment?

It’s a common misconception that you must put 20% down on a home. In fact, there are a number of loan options out there that will allow you to make a down payment of less than 20% – including mortgage insurance (MI), provided by the Federal Housing Administration or a private MI company.  Readynest is brought to you by MGIC, a private MI company. Learn more about mortgage insurance.

Whether you use mortgage insurance or not, you can still qualify for down payment assistance to help you cover that initial investment – whether it’s 3%, 20% or anywhere in between. 

What is down payment assistance?

There are over 2,500 programs across the country that provide down payment assistance to qualified borrowers, most often first-time homebuyers. In the mortgage world, the definition of a “first-time homebuyer” includes people who have owned a home in the past but not in the last 3 years. It’s definitely worth checking with your lender to see if you qualify, even if you think you probably don’t. 

Often this assistance comes in the form of a grant or forgivable second mortgage loan – money that does not need to be repaid as long as certain conditions are met. 

Those conditions vary widely from program to program, but could include:

  • Property location
  • Property price
  • Income limits
  • Your length of time in the home
  • Participation in a homebuyer education course

There are also some programs out there with special eligibility. For example, you could qualify for special assistance if you belong to a certain demographic (i.e., Native American) or work for the U.S. Military or in education, law enforcement or healthcare. 

Who provides down payment assistance?

Down payment assistance programs are offered by state Housing Finance Agencies (HFAs), cities or counties, local nonprofits organizations, or even large employers. Some of the funds for state and local programs are provided by the Department of Housing and Urban Development (HUD), but the federal government doesn’t make individual grants. 

Lenders may also offer their own programs to help first-time homebuyers purchase a home.

How can I find down payment assistance?

A loan officer can help you understand the down payment assistance programs available in your area and your individual eligibility. Not all lenders participate in all DPA programs out there, so look for a mortgage professional who seems knowledgeable about assistance options. 

If you aren’t quite ready to talk to a lender, here are some places to do a little research on your own: