Buying A Home Home Loans

How Down Payment Assistance Can Help You Buy a Home?

Written by Rebecca Lake

Buying a home is a major expense and if you’re taking out a mortgage, one of the things you need to plan ahead for is your down payment. For a conventional loan, 20% is the target amount buyers are encouraged to aim for if they want to avoid paying private mortgage insurance. For an FHA loan, you’re only looking at a 3.5% down payment, but that can still add up to some serious cash.

Down payment assistance programs are designed to ease some of the financial burden for qualified buyers. According to RealtyTrac, 87% of homes nationwide qualify for some kind of down payment help. If you’re planning to buy but you’re strapped for cash, here’s what you need to know about down payment assistance options.

How down payment assistance programs work

The idea behind down payment assistance programs is simple–they help buyers who otherwise wouldn’t be able to raise down payment funds on their own. There are three basic ways these programs can work.

First, there are programs that offer you a cash grant that you can use for your down payment. In exchange for the money, you’re required to live in the home for a certain number of years. If you move out before the cutoff, you’ll have to repay the grant. Depending on the program, there may also be certain requirements about where the property is located or what kind of structure it is.

Next, there are savings incentive plans that offer a matching contribution when you save money for a down payment, up to a certain limit. You have to set up a dedicated savings account for your down payment funds and the amount of the match can vary, with some programs matching as much as 100% of what you set aside.

Finally, there are down payment assistance programs that allow you to take an interest-free second mortgage on the home. Basically, you’re borrowing the money for your down payment but you’re not paying any interest on it. Depending on how the loan is structured, you may not have to pay the money back until you sell the house.

About the author

Rebecca Lake

Rebecca Lake is a personal finance writer and blogger specializing in topics related to mortgages, retirement and business credit. Her work has appeared in a variety of outlets around the web, including Smart Asset and Money Crashers. You can find her on Twitter at @seemomwrite or her website,

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