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Do you qualify for down payment assistance?

By Tracey Shell

November 2018

When it comes to buying a home, coming up with the down payment is often the hurdle that causes buyers the most stress. What if you could qualify for help with that down payment?

How do you qualify for down payment assistance (DPA)?

There’s no one-size-fits-all solution when it comes to home financing. The good news is that there are many down payment assistance and other homeownership programs that can give you the boost you need to buy your first (or next!) home. At Down Payment Resource, we track more than 2,500 of these programs ranging from grants to tax credits to forgivable loans. These programs can help you get in a home much more quickly and give you a valuable cash cushion for those other expenses, like the home inspection and home repairs.

Yet only 23% of consumers are familiar with low down payment programs. Many buyers overlook DPA because they automatically think they don’t qualify. But, according to new research from the Urban Institute, 36 percent of 2017 loans in the largest 31 US markets would have been eligible for down payment assistance. The average down payment benefit? $9,208!

When it comes to using a down payment program as part of your home financing package, it's important to know that both you (the buyer) and the home you are buying must meet certain criteria, which vary by program. One of the most-asked questions we get at Down Payment Resource is “who qualifies for these benefits?” Let’s look at the primary factors.

Homebuyer qualifications

Family finances matter. Program requirements include household income thresholds, credit score minimums and cash reserve requirements. Income thresholds are based on the area’s median income—up to 120 percent in high-cost markets. Income limits are almost always based on household size, so a program income limit as a percentage of median income would be significantly higher for a family of 5 than for a single person.

Most programs will require some money down from the homebuyer, as well as homebuyer education, especially for first-time homebuyers, to ensure your long-term homeownership success.

First-time homebuyer status. Many programs are designed for first-time homebuyers. But, keep in mind that a first-time homebuyer is defined by the Department of Housing and Urban Development (HUD) as someone who has not owned a home in 3 years. So, if you've been renting for the past 4 years, you're a first-time homebuyer again!

Plus, not all programs are reserved for first-timers—about 37 percent of programs we track in Down Payment Resource don’t include that requirement.

Your profession may give you an edge. More than 13 percent of programs are designed for individuals providing an important community service, including educators, protectors, healthcare workers and veterans. Homeownership programs like this, designed to help workers live in the community they serve, are especially helpful in high cost markets.

Property qualifications 

Must be your primary residence. Programs are designed for buyers who will be living in and contributing to the community. Homeownership program administrators require that the home is occupied as a primary residence in order to qualify.

Eligible properties include single-family homes, townhomes and condos. Plus, some 2- to 4-unit multifamily properties are allowed if the buyer is also an owner occupant. So, you could still earn rental income on your property as long as you also reside there!

Home sales price. Real estate is always local and that’s especially true for the sales price limits for down payment programs. They are typically based on a percentage of the area’s median home price. This means the home price limit can go from $250,000 up to well over $700,000 in certain high cost markets.

Programs available everywhere. Many homebuyers mistakenly believe down payment programs are only available in very targeted areas. In fact, programs are available in every community across the country, often for homes at price ranges above the median sales price for a given area.

Do you qualify?

Programs today are as diverse as the communities they serve. Take time to evaluate your options and discover what might be available for your personal situation.

Get started by searching for programs on DownPaymentResource.com. The more information you enter, the more precise your search results. Talk to your mortgage lender and real estate agent about opportunities in your area. And, contact your state and local housing finance agency for even more homebuyer resources and education.

Read more about down payment assistance programs on the Down Payment Resource blog. 

Related to This

Charlene •

My question is it possible to buy a home with a low credit score? My husband passed away and two thirds of my income went. I'm trying to build it back up.

Liz - Readynest Editor •

I'm sorry to hear about your husband, Charlene! You don't have to have a perfect credit score to buy a home. This story might help you understand your options: https://readynest.com/homebuyer-stories/is-your-credit-ready-for-a-mortgage

Mary •

Good information....though many do not know that DPA comes along with a mortgage product. DPA requirements sometimes do not coincide with the mortgage product. i.e. DPA requires credit score of at least 640. But when you apply for a mortgage product it’s requirement is credit score of at least 720! What gives!

Regina Hope Laban •

I am a disabled veteran, ) I served in the US Army for 13years . But, I have decided to use the FHA instead of the VA Home Loan. Although The VA home has no down payment requirement, the minimum credit score is 620. The minimum credit score for the FHA is only 585 and has a minimum of 3.5% interest. Also, FHA are possible with a credit score between 500 to 585, but with a higher interest rate of up to 10%. As for me, It’s been difficult to reach the VA home loan credit score.

Randy Reed •

Not sure uf I apply for a down payment assistance loan before applying for a morgage loan

Liz Keuler - Readynest editor •

Randy, it’s really all part of the same process. While it’s a good idea to research possible down payment assistance programs in your area in advance (try DownPaymentResource.com), you don’t need to “apply” for DPA before applying for a mortgage. As you shop for a mortgage, ask lenders which DPA programs they participate in and whether you might qualify.

Julie duncombe tapia •

Check credit score and rent is as much as a house payment if not more

Joshua Nguyen •

It is good to know.

Tonya •

I didn't realize that different banks participate in different programs. Also, some institutions don't tell the buyer about available assistance because it can slow down the closing process; that was my experience.

Donita L Durgan •

informative

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Tracey

Read more articles by Tracey
Tracey Shell is VP of Marketing Communications for Down Payment Resource and editor of its homebuyer blog. Down Payment Resource is the nation’s leader in providing homebuyers and professionals with information on down payment assistance programs.
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