The most common sources are your own savings, gifts from family, and down payment assistance programs run by state and local governments
Most people pay a down payment from money they have already saved. If you do not have enough saved, you have three realistic paths: borrow from family members (usually interest-free), use a down payment assistance program (which may be a grant or a low-interest loan), or buy with a smaller down payment and pay mortgage insurance. Which path works depends on what you have access to, how much you need, and whether you want to take on debt.
Down payment assistance programs exist in most states and many counties. They are run by housing finance agencies, nonprofits, and sometimes lenders themselves. Some programs give you money as a grant (you do not pay it back). Others are loans you repay as part of your mortgage or separately. A few require you to take a homebuyer education course first. The amount available, the income limits, and the rules about which properties may have access to all vary by program and by location.
Key Takeaways
- Savings, family gifts, and down payment assistance programs are the three main sources; most people use a combination of these.
- Down payment assistance programs are administered by state housing finance agencies and local nonprofits, not by a single federal office, so you need to search by your state and county.
- Some programs give grants (money you do not repay), while others are loans you repay through your mortgage or as a separate monthly payment.
- Many programs require proof of income, a signed purchase agreement, and completion of a homebuyer education course before funds are released.
- The amount you can borrow or receive, and the income limits that apply, change by program and location.
Finding down payment assistance programs in your state
Start with your state's housing finance agency. Every state has one—it may be called the State Housing Finance Agency, Housing Development Authority, or Housing Trust Fund. Search "[your state] housing finance agency" to find the office. Most maintain a list of down payment assistance programs available in your state, along with income limits and maximum amounts.
If your state's agency does not have a searchable list, contact your county assessor's office or your city's planning or community development department. They often know which local nonprofits and lenders offer down payment help in your area. You can also ask your real estate agent or mortgage lender—they work with these programs regularly and can tell you which ones you might may have access to for.
The National Council of State Housing Agencies (NCSHA) maintains a directory of state agencies. If you cannot find your state's agency through a search, NCSHA's website lists contact information for each state.
How down payment assistance programs work
Most programs require you to have a signed purchase agreement before you apply. They want to see the actual property address, the sale price, and proof that you and the seller have agreed to the terms. A few programs will give you a pre-approval letter before you find a home, but the money does not move until you have an offer accepted.
You will need to provide proof of income (recent pay stubs or tax returns), proof of savings or assets, a credit report authorization, and sometimes a letter from your employer confirming your job. Some programs require a minimum credit score; others do not. Many require you to complete a homebuyer education course—either in person or online—before the funds are released. The course typically takes four to eight hours and covers budgeting, mortgage basics, and home maintenance.
Processing time varies. Some programs fund within two to three weeks. Others take six to eight weeks, especially if they require the course or if the program is busy. Ask about timing when you first contact the program, and let your real estate agent and lender know so they can plan the closing date accordingly.
Grants versus loans: what you will repay
A grant is money you do not repay. It reduces the amount you need to borrow from the lender. Some grants are "forgivable loans"—they are technically loans, but the debt is forgiven after you live in the home for a set number of years (often five to ten). If you sell or move before the forgiveness period ends, you may owe the money back.
A loan is money you repay. Some down payment assistance loans are added to your mortgage (called a "silent second" or "piggyback loan"). You make one monthly payment to your primary lender, and they handle the second loan behind the scenes. Other programs give you a separate loan with its own monthly payment, interest rate, and term. A few programs offer zero-interest loans, but most charge interest.
Ask each program whether their assistance is a grant or a loan, and if it is a loan, whether it is added to your mortgage or separate. This affects your total monthly payment and how much you actually borrow.
Using family gifts for a down payment
Money from family members is often the fastest source. There is no application, no waiting, and no income limits. However, mortgage lenders require documentation. If you receive a gift, your lender will ask for a signed gift letter from the family member stating the amount, the date, and that it is a gift (not a loan you will repay). Some lenders also require a bank statement showing the money entered your account.
The gift can come from a spouse, parent, grandparent, sibling, or other family member. It cannot come from someone with a financial interest in the property (like the seller or the real estate agent). The lender wants to confirm the money is truly a gift and not a hidden loan that increases your debt.
If the family member is lending you money instead of gifting it, that is treated as debt. Your lender will factor it into your debt-to-income ratio, which may reduce the amount you can borrow for the mortgage. A gift avoids this problem.
Down payments smaller than 20 percent and mortgage insurance
If you cannot save or borrow enough for a 20 percent down payment, you can buy with less—as little as 3 percent on some conventional loans, or 3.5 percent on FHA loans. The trade-off is mortgage insurance, a monthly fee added to your payment that protects the lender if you default.
Mortgage insurance costs vary by loan type and down payment size. On a conventional loan with 10 percent down, mortgage insurance might add $100 to $200 per month to your payment. On an FHA loan with 3.5 percent down, it is typically higher. The smaller your down payment, the higher the insurance cost.
Some people use down payment assistance to reach 10 or 15 percent down, which lowers the mortgage insurance cost compared to putting down 3 percent. Others combine a small down payment with mortgage insurance and skip the assistance program entirely. Run the numbers with your lender to see which path costs less over time.
What to do if you do not may have access to for assistance programs
If your income is too high or you do not meet other program requirements, you have other options. Some lenders offer their own down payment assistance or matching programs—ask your mortgage broker or bank. Credit unions sometimes offer down payment help to members. Nonprofits focused on first-time homebuyers in your area may have funds or know of lenders with flexible terms.
You can also delay your purchase and save more, buy with a smaller down payment and mortgage insurance, or explore whether a co-borrower (like a spouse or parent) could help you may have access to for a program. Some programs count household income differently, so having a co-borrower might change your may be able to access.
Frequently Asked Questions
Can I use down payment assistance and a family gift at the same time?
Yes. Many people combine both. The assistance program covers part of the down payment, and a family gift covers the rest. Tell each program about the other source of funds—they need to know the full picture of where your down payment is coming from.
What if the down payment assistance program requires a course and I do not have time?
Most programs offer online courses that you can complete on your own schedule, often in one or two sittings. A few offer in-person classes on weekends or evenings. Contact the program and ask about course options before you assume you cannot meet the requirement.
Do I have to use a specific lender if I get down payment assistance?
Some programs work with any lender; others have a list of approved lenders. Ask the program whether you can use your own lender or whether you need to choose from their list. If you already have a lender, check with them first to see if they are approved.
What happens to the down payment assistance if I sell the house in a few years?
If it is a grant, you keep it—no repayment. If it is a forgivable loan, you may owe it back if you sell before the forgiveness period ends (usually five to ten years). If it is a regular loan, you repay it from the sale proceeds. Ask the program for the exact terms in writing before you accept the funds.
Can I get down payment assistance if I have bad credit?
Some programs do not require a minimum credit score; others do. A few programs work specifically with people rebuilding credit. Contact programs in your area and ask about their credit requirements. Even if one program declines you, another may not.