Understanding Down Payment Assistance Programs

Down Payment Assistance (DPA) programs offer significant benefits to homebuyers, helping to make homeownership more affordable by reducing upfront costs. These programs also enhance accessibility for buyers who may not have substantial savings. DPA programs can be the key to building wealth through homeownership, while keeping savings intact for future expenses. We’ll look at types of Down Payment Assistance programs, how to qualify, and examples of the benefits that could help you with your homeownership goals.

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How Does Down Payment Assistance Work?

DPA comes in various forms, each with different structures and benefits:

Grants: Non-repayable funds provided to eligible borrowers.
Second Mortgages: Additional loans that must be repaid, sometimes with favorable terms.
Deferred Loans: Loans that do not require repayment until the home is sold, refinanced, or paid off.
Forgivable Loans: Loans that are forgiven over time if the borrower meets specific requirements, such as living in the home for a certain period.
Bond Loans: State or local government-funded programs offering reduced-interest loans or down payment assistance.

How Do I Qualify for Down Payment Assistance?

To be eligible for DPA programs, homebuyers typically need to meet certain criteria. The most common qualifying characteristics are:

First-Time Homebuyer Status: Many DPA programs require applicants to be first-time homebuyers, often defined as not having owned a primary residence in the past three years. These programs typically require the borrower to complete a homeownership education course.

Income Limits: Eligibility is often based on Area Median Income (AMI), meaning a buyer’s household income must be at or below a certain percentage of the local AMI. For DPA programs, the homebuyer’s household income would need be less than or equal to 50-80% of the applicable AMI. The actual percentage ranges depending on the program. Along with income limits, you may need to live in a specific county or state to qualify.

Credit Score & Debt-to-Income (DTI) Ratio: Credit score requirements for Down Payment Assistance programs will vary, but a minimum score of 620 is common. DTI requirements also differ by program, but it plays a crucial role in mortgage approval. To qualify, you’ll need to meet both the program’s guidelines and your lender’s specific DTI and Loan-to-Value (LTV) thresholds.

Occupancy: Most DPA programs require the home to be your primary residence. Usually, you cannot use down payment assistance funds for second homes or investment properties. In addition, you would need to live in the home as your primary residence for a specified number of years (e.g. 3-5 years) to be eligible for loan forgiveness or to avoid repayment penalties. Some programs offer forgivable loans that are waived after a set time if you maintain the occupancy.

What are the Benefits of Down Payment Assistance Programs?

There are several well-known down payment assistance programs available across the United States, including:

HomeReady® (Fannie Mae): A mortgage program designed for low-income borrowers, whether they’re first-time or repeat buyers. What are the benefits?

Down payment and closing costs assistance from gifts, grants, or Community Seconds®.
No minimum personal funds required.
Flexible loan terms with low interest rates.
As low as 3% down payment.
A $2,500 credit for very low-income borrowers (earning ≤ 50% of the Area Median Income (AMI)), available through February 2026. At least one borrower must be a first-time homebuyer to qualify for this extra assistance.

Home Possible® (Freddie Mac): A mortgage program for low- to very low-income buyers with flexible funding sources, similar to HomeReady by Fannie Mae. What are the benefits?

Down payment and closing cost assistance from gifts, grants, employer programs, and Affordable Seconds®.
Do not have to be first-time homebuyers.
Competitive rates.
Down payments as low as 3%.
Also offers a $2,500 closing cost credit for borrowers earning ≤ 50% AMI. This is available through February 2026 and one borrower must be a first-time homebuyer.

Bond Programs (State and Local Government Assistance): Bond programs offer financial assistance through government-backed bonds, helping eligible buyers with home financing. Each state has its own program with different benefits, but some common features include:

Forgivable or Repayable Down Payment Assistance: Some funds do not need to be repaid if the homeowner stays in the home for a certain number of years. Others are structured as second mortgages with low or no interest.
Reduced Mortgage Rates: Bond funds help subsidize mortgages, so borrowers may qualify for below-market rates, leading to lower monthly payments.
Tax Credits: Mortgage Credit Certificates (MCCs) allow first-time buyers to claim a portion of their mortgage interest as a tax credit.

What are Some Examples of State-Specific DPA Programs?

Here are a few notable state-specific programs available for qualifying borrowers:

Hometown Heroes (Florida): Designed to help Florida workers afford homeownership, Hometown Heroes was initially only offered to certain occupations such as active-duty military, Veterans, teachers, healthcare professionals and first responders. In July 2024, it was opened to all occupations.

Must be employed full-time by a Florida-based employer and work or report to a physical location in Florida (except for Veterans).
Must be a first-time homebuyer (or not have owned a primary residence in the last three years), unless purchasing in a targeted area or a Veteran.
Must meet minimum household income limits for the county where the home is located.
Minimum 640 credit score with up to 50% debt-to-income (DTI) ratio.
5% of the total loan amount (up to $35,000) in down payment and closing cost assistance (minimum $10,000).
No interest repayable second mortgage (not forgivable).
Reduced mortgage insurance for borrowers earning ≤ 80% AMI.
Repayment is deferred until the home is sold, refinanced, transferred, or no longer the primary residence.

MyHome Assistance (California – CalHFA): The California Housing Finance Agency (CalHFA) offers multiple down payment assistance options, including deferred-payment loans and forgivable second mortgages for first-time homebuyers.

CalHFA Government Loans (FHA): A deferred payment second loan of up to 3.5% of the purchase price or appraised value (whichever is less).
CalHFA Conventional Loans: A deferred-payment second mortgage of up to 3% of the purchase price or appraised value.
First-time homebuyers who are residents of California.
Must occupy the home as a primary residence.
Must complete homebuyer education counseling.
Must meet income limits for the county where the home is located.

Down Payment Assistance programs can be an incredible resource for aspiring homeowners who need financial assistance to afford a down payment. By understanding the different types of DPA and their eligibility requirements, buyers can take advantage of these programs to make homeownership a reality. If you’re considering purchasing a home and want to explore the options available to you, speak with one of our licensed Mortgage Loan Originators to help you determine the right program for your situation.

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Buying a home is one of the most important financial decisions you will make. Understanding mortgages and the home buying process can help make it less stressful, and so can partnering with a mortgage lender you can trust. At FBC Mortgage, LLC, we’re dedicated to helping home buyers finance their dream home.

All information presented is for educational purposes only and not intended as financial advice. FBC Mortgage, LLC is a national mortgage lender headquartered in Orlando, Florida. Specializing in residential mortgage lending, including purchase, refinance, construction, and renovation loans. See what our clients have to say. NMLS#152859 EHL ©2025.