July 26, 2022 by Leave a comment

Not everyone has the funds saved to make a big enough down payment on a home. If you’re a first-time home buyer, the good news is that you may qualify for down payment assistance through state or local programs.

There are many pros and cons of down payment assistance, but these programs can help put homebuying within reach for those who qualify. 

Here’s what you need to know about down payment assistance and how it can help make homeownership possible. 

What Is Down Payment Assistance and How Does it Work?

Buying a home typically requires homebuyers to make a down payment, which is part of a home’s purchase price you pay upfront. Down payment assistance, which is generally reserved for first-time homebuyers, is any program or funding that helps buyers reduce the amount they need to save to make a down payment.

DPA programs are offered nationwide by state, county, and city governments, non-profit organizations, or directly through the lender. Depending on the down payment assistant (DPA) program, you could receive a grant or low-interest loan to use towards your down payment. Some DPA programs allow buyers to use funds towards closing costs as well.

Common types of down payment assistance include:

  • Grants: A grant is gifted money that can be used towards a down payment. Grants do not have to be repaid. However, some programs may use the term “grant” but come with repayment requirements.
  • Low-interest loans: This is repaid along with your regular mortgage payment over a set period of time.
  • Deferred loans: These loans usually don’t charge interest and don’t have to be repaid until you sell, refinance, or the mortgage reaches the end of its term.
  • Forgivable loans: Forgivable loans expire after a certain period of time, meaning they don’t have to be paid back. However, this is only true if you own the home and make timely mortgage payments.

Who Is Eligible for Down Payment Assistance?

Down payment assistance is generally only available to first-time home buyers; however, being a first-time home buyer doesn’t necessarily mean it’s your first home purchase. You can qualify as a first-time home buyer if you haven’t owned a principal residence for the three-year period ending on the date of purchase of the new home.

Qualification may also depend on your household’s income and your credit history. The purchase price of the property and its location may also be considered for certain down payment assistance programs. 

Each DPA program is different, so make sure to check with the program if you’re unsure about eligibility.

If you’re ready to become a homeowner, check out Total Mortgage. You can apply for a loan online and get a free quote.

How Long Does It Take To Get Down Payment Assistance?

How long it takes to get down payment assistance depends on the program. Every DPA program has its own process, so speed will vary.

Don’t be surprised if it takes longer to close on your mortgage. Because these programs must work with your lender, down payment assistance could also affect your closing timeline.

Pros and Cons of Down Payment Assistance

It’s important to weigh the pros and cons of down payment assistance before deciding if it’s right for you. Here are some key points to keep in mind. 

Pros of Down Payment Assistance

  • You can buy a home sooner. For conventional loans, you can make a down payment as low as 3%. But on a $300,000 mortgage, this is the equivalent of $9,000. Without down payment assistance, it could take months or years before you’re able to save enough for a down payment.
  • You may be able to avoid private mortgage insurance (PMI). If the down payment assistance program gives you enough to put down 20% on the home, you could potentially avoid paying PMI.
  • You may qualify for more favorable mortgage terms. A larger down payment lowers your loan-to-value (LTV) ratio. By lowering your risk level, you could be offered a better interest rate on your mortgage.
  • You can keep more money in your pocket after closing. By using down payment assistance, you can save more money upfront instead of putting all of your savings into your down payment.

Cons of Down Payment Assistance

  • It could cost you more over time. If you use an interest-bearing loan, you could spend more paying it off than you would have if you didn’t use assistance.
  • You could overextend yourself. Assistance may allow you to purchase a more expensive home, but it could add financial stress down the road.
  • Closing could take longer. Down payment assistance adds an extra step to the mortgage process. This could push the closing date further out than it would have been without assistance.
  • The program may require you to live in the home for a certain number of years. To have some types of assistance forgive, you may be required to occupy the home for a certain length of time. 

Do You Have to Pay Back Down Payment Assistance?

Down payment assistance isn’t always free money. Whether or not you have to pay back down payment assistance depends on the program. Each program has different terms, so it’s important to pay attention to the details.

Low-interest loans and deferred loans typically have to be repaid, but grants and forgivable loans may not have to be paid back. However, you may be required to meet certain conditions in order for the loan to be forgivable. 

How Much Do You Get for Down Payment Assistance?

How much you get for down payment assistance depends on the program. Some may offer a flat dollar amount while others may offer a percentage of the home’s purchase price. 

For example, MassHousing covers 10% of a home’s purchase price up to $50,000 in down payment assistance if you purchase a home in select communities or up to $30,000 elsewhere in the state. Meanwhile, the Connecticut Housing Finance Authority (CHFA) provides a down payment assistance loan of up to $20,000.

Need Home Financing? Consider Total Mortgage

Down payment assistance isn’t for everyone. There are plenty of pros and cons of down payment assistance and each program comes with its own set of eligibility requirements. Make sure to consider all of your options and the long-term consequences of accepting assistance.

Looking for the right mortgage product? At Total Mortgage, we have mortgage experts across the country to help you with your home buying needs. Find a Total Mortgage office in your area today to explore your options.


Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.

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