How Down Payment Assistance Programs Work

Down payment assistance programs are meant to help first time homebuyers obtain the dream of homeownership. They are often established and funded by state and even local governments or other entities to help increase homeownership in those areas. These can come in the form of grants or loans. Some require monthly payments, while others do not, and some require repayment of the assistance and others have terms that allow for forgiveness. It is important to find the one that fits your personal needs and situation. 

First Time Homebuyers: Assistance Programs and Options

One of the most challenging obstacles when purchasing a home is saving enough funds for the down payment and closing costs. The good news is there are many assistance programs and options available for first time homebuyers. At Quaint Oak Mortgage, we work with buyers looking for help getting into their first home, and compiled a list of down payment assistance programs to consider.

What Are Some of the Programs Available?

  • PHFA KFIT – The Pennsylvania Housing Finance Agency offers a program that provides prospective PA buyers a forgivable loan up to 5% of the purchase price. The loan program is fully forgiven as long as you occupy the property for 10 years and requires no monthly payment. 
  • First Front Door Grant The Federal Reserve Bank of Pittsburgh offers a first time buyer grant that provides up to $15,000 to use towards down payment and closing costs with a minimum contribution of $1,500. As a grant there are no monthly payments. Funding for the 2024 First Front Door Grant has closed. You can learn more about First Front Door here.
  • Philly First Grant Buyer’s in the City of Brotherly Love can receive up to $10,000 in the form of a forgivable grant towards their purchase. This program requires borrowers to complete homeownership counseling prior to getting under contract.
  • Community Closing Cost and Down Payment Assistance Loan Programs – Other municipalities nationwide may also offer grants or down payment assistance programs. Try an internet search with that county and/or city name and “down payment assistance.”

What Do First-Time Buyers Need to Know?

Grant programs bridge the asset gap for first time buyers, and are often accompanied by prospective homebuyer requirements. Discuss the program details with your loan officer thoroughly to ensure you meet the program guidelines and you are fully versed on the terms of the assistance.

  • Educational Counseling – All of the programs listed above require the borrower to complete homeownership counseling with an approved agency. 
  • Occupancy – All grants and loan programs require the home to be lived in by the borrower for anywhere between 5-10 years, which varies from program to program. If the time requirement for occupancy is not met, a pro-rated portion of the grant or loan program funds will need to be paid back to the grant organization.
  • Income Limit – Income eligibility is determined by location and household size. Typically, a borrower must be at or below 80% of the area’s median income, or as determined by the program.

Other Options for Down Payment Assistance Programs

Grants and loan programs are not the only way buyers can reduce their total cash to close. Here are some additional options:

  • Seller Assist Provides the borrower a portion of the seller’s proceeds to reduce their cash to close. While difficult to negotiate in a seller’s market, it is certainly not impossible. 
  • No Down Payment Loan Programs – There are some loan programs where borrowers are not required to make any down payment.
    • VA Veterans can take advantage of 0% down financing! In addition to the upfront savings, VA loans do not require mortgage insurance and offer lower rates than many conventional programs.
    • USDA Prospective buyers looking to move outside of urban areas may be able to take advantage of a 0% down USDA loan. Eligibility is determined by location and income.

Work with Quaint Oak Mortgage for a Personal Touch

There is a lot of information to process when considering a home purchase and it can be overwhelming for first time buyers. As such, it’s crucial to work with professionals that can answer your questions and ensure you are making fully informed decisions. We have a team of professionals that can help educate, guide, and support you throughout the entirety of the mortgage process from prequalification to closing. Contact one of our experienced mortgage bankers today and take that first step towards homeownership!

Contact Us Today!

Quaint Oak Mortgage Serves Alabama, California, Delaware, Florida, Idaho, Iowa, Maryland, Massachusetts, Michigan, Missouri, Nebraska, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Utah, Vermont, and Virginia

Not all applicants will qualify. Minimum credit scores requirements, purchase price restrictions and income requirements apply to all grant and loan programs. Quaint Oak Mortgage is an approved lender for the grant and loan programs. All homebuyer assistance and grant programs are subject to the recipient obtaining a qualifying first mortgage loan from a participating lender. Not all applicants will qualify. All home lending products are subject to credit score, LTV (loan-to-value), DTI (debt-to-income) requirements and property approval. Rates, program terms and conditions are subject to change without notice. All loan programs and grants are only available in certain geographical locations. All products are not available in all states or counties and the funding amount may vary depending on geographical location. Grants and down payment assistance amount may be due upon sale, refinance, transfer, or repayment of the loan will be required if the property is rented or not occupied by the recipient or if the senior mortgage is assumed during the term of the loan. Down payment assistance and grant programs may only be applied once to an eligible mortgage/property, regardless of the number of applicants. Approved applicants may not always receive the maximum allowable amount offered through the program. To be eligible the borrower must be a first time homebuyer that will retain the property as a primary residence and not all property types are eligible for grant and loan programs. Some grant programs have limited funding for the year and will close for the year once the funding threshold has been met. Financing is based on the lower of the appraisal value or contract purchase price. For some programs where income limitations apply the borrower cannot be a student working less than 30 hours per week. Borrowers cannot receive program funds as cash back in excess of earnest money deposits and or closing costs. Some grant programs may be considered taxable income, a 1099-MISC may be issued, consult with your tax advisor for further details. Homebuyer education classes may be required to participate in the homebuyer assistance and grant programs. Homebuyer assistance programs and grant programs are not available with all mortgage loan products being offered or advertised, please ask for details when applying.