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Want to buy a home with an FHA mortgage but are worried about coming up with your down payment? There are plenty of state and local down payment assistance programs but before you consider applying for one, there are some things you should know.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

What You Should Know About Down Payment Assistance Programs

January 2, 2022

What You Should Know About Down Payment Assistance Programs
Want to buy a home with an FHA mortgage but are worried about coming up with your down payment? There are plenty of state and local down payment assistance programs but before you consider applying for one, there are some things you should know.

To start, it is a good idea to plan your mortgage with a budget that assumes you will need to come up with the down payment all on your own even if you do qualify for down payment assistance.

Why? Some programs have limited funding and application windows--you may not make it into the current year’s application pool depending on when you apply.

Another reason to consider saving for your down payment even if you plan to apply for assistance? Doing so may force you to take longer to buy a home. For some consumers that extra time is a blessing in disguise.

That’s because it takes time to work on the other areas of your personal finance issues that can affect loan approval. Those issues include finding the right lender (it pays to shop around), working on improving your credit scores and repayment history, etc.

Down payment assistance programs often (but not always) come with some kind of consideration regarding the financial status of the applicant. Some down payment assistance programs require you to demonstrate a financial need or have household income (not just your own income) that is under a certain cap or limit.

Purchase price limits may also apply with down payment assistance programs. Those two factors together may make it a bit more challenging to find a property that meets the purchase caps that is suitable for your living situation.

Some borrowers may find that higher purchase price limits and income caps apply when buying homes in what are often labeled "targeted areas."
 
And you may also find that some of these programs may require the down payment assistance to come in the form of a forgivable second mortgage. This loan may be considered non-repayable when the borrower meets certain conditions like having lived in the home for x number of years as the primary residence.

Some down payment programs also feature closing cost assistance. In some cases, this is offered in a lump sum while other programs may offer these two forms of help separately.

Down payment assistance programs help many people become homeowners for the first time, but a lot of these programs have provisions for those who have not owned a primary residence in the last three years--if that is true, you may find yourself being offered the same help as a first-time homebuyer.

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