Where down payment help actually comes from
Down payment help comes from four main sources: government programs run by your state or city, nonprofits that work with first-time buyers, employer programs, and family loans or gifts. Government programs are the most common route, but they vary wildly by location—what exists in one county may not exist in the next. Nonprofits often bundle down payment money with homebuying classes. Employers sometimes offer down payment loans as an employee benefit. Family gifts are the fastest but come with their own rules about what lenders will accept.
The money itself takes different forms. Some programs give you a grant (money you do not repay), some offer a forgivable loan (you repay it only if you sell the house within a set time), and some are straight loans at below-market rates. A few programs combine all three—a grant for part of it, a loan for the rest. The catch is that most programs have income limits, require you to take a homebuying course, and only work if you are buying a primary residence, not an investment property.
Key Takeaways
- State and local housing finance agencies run the most common down payment programs, and your state's website lists what is available in your county.
- Nonprofits like NeighborWorks and local community development organizations often offer down payment grants paired with required homebuying education.
- Employer programs exist but are less common; check your HR benefits guide or ask your benefits administrator whether your company offers down payment loans.
- Family gifts are allowed by most lenders but usually require a signed letter stating the money is a gift, not a loan you will repay.
- Income limits, homebuying course requirements, and property type restrictions vary by program, so you need to check the specific rules for each one you consider.
State and local housing finance agencies
Every state has a housing finance agency (sometimes called a housing authority or development agency). These agencies run down payment assistance programs funded by state bonds and federal money. The programs go by different names in each state—some call them down payment assistance, some call them first-time homebuyer programs, some bundle them into larger mortgage products. Your state's website has a list, usually under a section called "homebuyer programs" or "first-time buyer assistance."
To find your state agency, search "[your state] housing finance agency" or go to the National Council of State Housing Agencies website, which links to every state. Once you find your agency, look for programs that match your situation: first-time buyer, income level, and the county where you want to buy. Many states offer both grants and forgivable loans. Some cap the down payment help at 3 to 5 percent of the purchase price; others go higher. Income limits vary—some programs serve households up to 80 percent of area median income, others go to 120 percent.
The application process usually requires proof of income (tax returns or pay stubs), a credit report, a pre-approval letter from a lender, and proof that you have completed a homebuying education course. Approval timelines range from two to six weeks. Many programs require you to work with a lender they have partnered with, so you cannot always use your own bank.
Nonprofits and community development organizations
Nonprofits like NeighborWorks America, Habitat for Humanity, and local community development corporations (CDCs) offer down payment grants and sometimes matching grants—they give you money if you save a certain amount yourself. These organizations often require you to complete a homebuying course as a condition of receiving the money, which can take anywhere from one evening to several weeks depending on the format.
The grants are usually smaller than government programs—often $2,000 to $10,000—but they are easier to combine with other sources of help. Some nonprofits will stack their grant on top of a state program, which means you could receive money from both. Income limits are typically lower than government programs, targeting households at or below 60 percent of area median income, though this varies.
To find nonprofits in your area, search "down payment assistance nonprofit [your city]" or call 211 (a referral line for social services). You can also contact your local housing authority or community development department; they usually maintain a list of nonprofits doing this work. Ask specifically whether the organization offers grants versus loans, whether the homebuying course is required or optional, and whether you can combine their money with other programs.
Employer down payment programs
Some large employers offer down payment loans as an employee benefit. These are less common than health insurance or 401(k) matches, but they do exist, especially at tech companies, financial institutions, and large corporations. The loans are usually at below-market rates and have flexible repayment terms. Some employers forgive a portion of the loan if you stay with the company for a set number of years.
Check your employee benefits guide or ask your HR or benefits department whether a down payment program exists. If it does, ask for the interest rate, repayment term, whether it is a loan or a grant, and whether there are restrictions on the property type or location. Some employer programs require you to buy within a certain distance of your workplace or within a certain timeframe after you receive the money.
Lenders treat employer loans like any other loan—they count against your debt-to-income ratio, which affects how much you can borrow for the mortgage itself. Make sure you understand the full cost before you commit.
Family gifts and loans
Lenders allow family members to give you money for a down payment, but they require documentation. You will need a signed letter from the family member stating that the money is a gift and not a loan you are obligated to repay. The letter should include the amount, the date, and a statement that no repayment is expected. Some lenders have a specific form they want you to use; ask your lender before you ask your family member to sign anything.
If the money is a loan rather than a gift, the lender will treat it as debt. It will count against your debt-to-income ratio and may reduce the amount you can borrow for the mortgage. If you want to borrow from family, you will need a promissory note (a legal document stating the loan amount, interest rate, and repayment term) and proof that the money actually came from your family member's account, not from another lender.
Gifts from family members do not have income limits or restrictions on property type, which makes them flexible. The downside is that they depend on whether your family has the money and is willing to give it. If you are considering a family loan, have a clear conversation about repayment expectations before you accept the money.
Down payment assistance through your mortgage lender
Some mortgage lenders offer their own down payment assistance programs, either as grants or as second mortgages (loans secured by the house itself). These are less common than they used to be, but they still exist. The programs usually target first-time buyers and may have income limits. Interest rates on second mortgages are higher than primary mortgage rates, so compare the total cost before you commit.
Ask your lender directly whether they offer down payment help. If they do, ask whether it is a grant or a loan, what the terms are, and whether it stacks with other programs. Some lenders will not let you combine their down payment money with government programs; others will. Get the answer in writing before you move forward.
Combining multiple sources of down payment help
You can often combine money from different programs—for example, a state grant plus a nonprofit grant plus a family gift. The key is to tell each program about the others before you apply, because some programs have rules about what other money you can receive. A few programs will not work with you if you are also receiving money from another government source, though this is less common now.
When you combine sources, keep track of which money came from where and what the terms are. A grant does not need to be repaid. A forgivable loan needs to be repaid only if you sell within a certain timeframe. A regular loan needs to be repaid regardless. Your lender will need to know all of this before they finalize your mortgage.
The order matters too. Apply for government programs first, because they have the longest approval timelines and the most restrictions. Once you know what you are getting from government sources, apply to nonprofits and then ask family. This way you are not chasing money you do not need.
What happens if you do not meet the income limit
Most down payment programs have income limits, and if you exceed them, you are not may be able to access for that particular program. However, you have other options. Some lenders offer down payment assistance to borrowers above the income limit, though usually at higher interest rates. Some nonprofits have separate programs for moderate-income buyers. Family gifts and employer programs do not have income limits.
If you are close to the income limit, ask the program administrator whether the limit is based on household income or individual income, and whether certain types of income (like bonuses or overtime) are counted. Some programs use area median income, which changes year to year, so you might be may be able to access next year even if you are not this year. If you are significantly over the limit, focus on family gifts, employer programs, and saving more of your own money.
Frequently Asked Questions
Do I have to take a homebuying course to get down payment help?
Most government and nonprofit programs require it, though a few do not. The course is usually one to three days and covers topics like budgeting, credit, and what to expect during closing. Some programs let you take the course online; others require in-person attendance. Ask each program whether the course is required before you apply.
Can I use down payment help to buy a second home or investment property?
No. Government and nonprofit programs are for primary residences only—the house you will live in as your main home. Investment properties and vacation homes do not may have access to. Some employer programs have the same restriction; others do not. Check the specific program rules.
What if I get a down payment grant and then sell the house a year later?
It depends on the program. A true grant does not need to be repaid no matter what. A forgivable loan usually requires you to repay it if you sell within a set timeframe, often five to ten years. Ask the program what happens if you sell, and get the answer in writing. If you are considering selling soon, a grant is better than a forgivable loan.
Can my parents give me money for a down payment without it affecting my taxes?
Gifts to family members are not taxable income to the person receiving them, so you do not owe taxes on the gift. Your parents may owe gift tax if the gift is very large (over $18,000 per person per year as of 2024, though this changes annually), but that is their tax issue, not yours. Have them consult a tax professional if the gift is large.
How long does it take to get down payment help approved?
Government programs typically take two to six weeks. Nonprofit programs vary—some approve in one to two weeks, others take a month. Employer programs depend on your company's process. Family gifts can happen immediately if your family member has the money available. Start the process early; do not wait until you are under contract to buy a house.