How Does Down Payment Assistance Sound?


With the ongoing pandemic, a little financial assistance wouldn’t hurt, especially if you are tight on money and the economy is tanking. This is the reality that you and millions of Americans are living in. In a situation like this, adaptation is the key to getting through the entire crisis smoothly. (Consider yourself as a really lazy chameleon and adapt away.)

Now, if you are looking to buy a house and you do not have the money for the down payment, then you are in luck. Because the Down Assistance Program can definitely help you, as it has helped millions before you get the house of their dreams. This source of funding is supported at the federal, state, and local levels. It serves to significantly reduce the down payment you need to purchase a home.

What is a Down Payment Assistance Program?

You have the option to look for a down payment assistance program that could help pay your down payment. A Down Payment Assistance Program (DPA) provides funds for you to use for your down payment on a house. It is allowed to be legally disclosed to the lender of a first mortgage. You may find that Down Payment Assistance Programs are not easy to find as loans, but there are over 2,000 different Programs across the United States.

The Department of Housing and Urban Development funds and offers these programs for low-income families and individuals. Other government-supported entities support the Down Payment Assistance Program as a form of community development and responsibility. To be able to find out more about Down Payment Assistance Programs, you can always contact your local government housing agency.

For most Down Payment Assistance Program, there is a strict eligibility requirement, but they are not as demanding as standard loans. You will go through a similar process as applying for a loan; the Program will even ask for the same information.

Down Payment Assistance Programs offer from $1,000 to approximately 20% of a property’s value. But, the amount is significantly less than that of a standard loan. (Kagan)

How Does Down Payment Assistance Work?

The way it works is quite simple. Let us say, you want to purchase a residence worth $150,000 and the down payment is $4,500. (That would be around 3 percent of the total). Coming up with that amount may take a little time, if you don’t have a portion of that amount aside. But, the Down Payment program speeds up the process for you and provides the much-needed financial support you require to secure a clean purchase. (That is only if you are eligible.)

Determining how much assistance you are entitled to get may depend on the area that you plan to live in and make the purchase. Your level of need and the zip code are two extremely important factors for assessment. These two factors will evaluate how much of a contribution you would need. There are federal regulations and standards that need to be upheld.  But, state governments and local organizations have their individual policies that they use to move the process forward and serve their local communities.

Types of Down Payment Assistance

Now, you understand what down payment assistance is and how it works. The question is which program is for you? Before you go into a whirlpool of research, let us save you the trouble. There is a huge variety of Down Payment Assistance funds, too many to count. (The federal government is very helpful.) But, we cannot go through all of them or you will be here all day.

So, instead, here are some of the most common forms you will find out there:

  • Zero-interest, deferred-payment loans: The rules and regulations of this loan vary But, the general policy is that repayment towards this type of loan. This means that covering the down-payment and closing expenses is not required, until after the mortgage is refinanced. Also, you will not have to repay the loan until the mortgage expires and the home is sold. (If either of those conditions come up, it’s time to pony up the money.)
  • Zero-interest, forgivable loans: These are loans that offer a grace period of up to five years (at times) for repayment with no interest. It is not a hard necessity to repay the money. The only condition is that the buyer receiving the assistance owns and lives in the property until after the grace period is over. (Yes, it actually says forgivable. How very Dalai Lama of them.)
  • Grants: It’s basically free money that they give you, if you qualify to help pay the down payment. The grant will partially pay for the down payment with you. (But, free money is still good money.)
  • Low-interest loans: These are loans that do require repayment throughout a determined period, such as eight years. It creates a long payment plan for the down payment and other property-related expenses. Overall, the zero-interest loans seem like the most generous of the offers. (This means that you will need to pay them back, but eight years is a long time.)

Advantages and Disadvantages of Down Payment Assistance Programs

One of the main considerations of down payment assistance programs is that it might not be the best option for everyone. You might not need it, or it might not be the right financial move for you. In order to find out whether you should apply for the down payment assistance program, you should take into consideration its pros and cons. (Yale)

Pros of Down Payment Assistance Programs

The main benefit when it comes to Down Payment Assistance Programs is that lower-income and middle-income families and individuals can easily purchase a home. With the assistance of the Program, you will need less money to provide upfront, which will lead to purchasing a home faster. (You will not need to save money until you are fifty-five years old just to buy your forever home.)

Down Payment Assistance Programs also assist families and individuals with a certain income bracket to apply for mortgage financing. There are certain requirements that will make you eligible to receive loans. As an example, Federal Housing Assistance loans need anywhere from 3.5% to 10% of the buying price as a down payment. (U.S. Department of Housing and Urban Development )

The final aspect to add to the “pros” list is that Down Payment Assistance programs allow buyers to be eligible for a lower interest rate on their first mortgage. This lowers the risk of the lender, keeping you in a financially safer zone. Borrowers who qualify gain access to a lower interest rate through the Down Payment Assistance Programs. (We do not make the rules; you should thank the Down Payment Assistance Program for that.)

Cons of Down Payment Assistance Programs

For the down side of the down payment assistance programs, there are three main disadvantages that come from the Programs. The forgivable loan does not require you to repay the balance. But you will need to reside in the home for a certain period of time. The disadvantages significantly lessen if you can afford the mortgage payment and the upkeep cost of the home.

As for Down Payment Assistance Programs that require repayment and interest, you will be adding financial stress. This is definitely applicable to lower-income borrowers. The loans from the Program will mean that you need another monthly payment and greater long-term interest. There are Down Payment Assistance Programs that have restrictions on the when and the how of houses being sold.

Last, but not the least, there are strict eligibility requirements for Down Payment Assistance Programs. (This is not Disney Land; you are not getting a free balloon.) Most Down Payment Assistance Programs aim to help lower-income families and individuals, first-timers, veterans, public servants, and other categories. You should keep in mind that the Down Payment Assistance funds are limited, so it is first-come, first-serve. (This is the Hunger Games and may the odds be ever in your favor.)

Eligibility Requirements

The good news is that you can get a general idea of where you stand, in terms of qualifying for the loan. You can simply put on your slippers and pay a visit to the Down Payment Assistance website. The website asks you to complete a brief questionnaire, which will ask you about the property you wish to acquire and how much funding is needed. This online questionnaire does not require a credit check and is free of charge.

Nonetheless, we do recommend that in order to qualify, you maintain good standing with your credit rating. Your credit score should be a minimum of 550. It should also be noted that down payment assistance can only be provided by those seeking to purchase single-family homes. Apartments and mobile homes are not applicable to the Program.

What About Your Credit?

Instead of being shut down by the market, you can find help through down payment assistance programs. (Being shut out is the worst and a total beating to your confidence.) If you have been pre approved for a mortgage, then you can be eligible for down payment assistance. During the process of pre approval, the lender will look through your income, credit history, and expenses. This will help them evaluate how much of a credit risk you might be.

Sometimes your credit might not be in the best shape. In that case, you will need to improve it as best you can. If possible, it would be the best case scenario for you to improve your credit before applying for pre approval or for down payment assistance. The only way we can think to improve your credit is by paying all your bills on time. The most damaging aspect on your credit is late payments. (So, you should pay your bills on time, as a long term investment and a form of self-sufficiency.)


Everything you need to know about Down Payment Assistance Programs is in this article. In conclusion, the U.S. Department of Housing and Urban Development funds Down Payment Assistance Programs. These programs offer different types of funds that will cover your down payment on a house. This will make it easier for you to buy a house, rather than wait a while saving for the down payment.

There are four most common types of Down Payment Assistance Programs, which are: zero-interest deferred payment loans, zero-interest favorable loans, grants, and lower interest loans. Zero-interest deferred payment loans are loans that require repayment after your mortgage is refinanced or the mortgage is expired.

As for zero-interest favorable loans, you will not need to repay the loan. But, you will need to reside in the house after the grace period. Grants are free funds without any requirements, but they only cover a partial cost. The final type of program is lower interest loans, which requires repayment throughout a determined period, such as eight years. However, the Program officer provides a financial plan that you can follow throughout the years.


There are pros and cons when it comes to Down Payment Assistance Programs. You will be able to apply for a mortgage with less interest and you will be able to purchase a house faster. However, you need to apply quickly for a Down Payment Assistance Program, since it is a first-come, first-serve basis. Also, you will be paying for a second monthly payment, which could be a financial overload on you.

You need to be very diligent when it comes to Down Payment Assistance Programs. It is okay to sit down and think through the pros and cons. You might not need the Program or it might be too much on your plate. Do not worry, there are alternatives to the Down Payment Assistance Programs.

Works Cited

Kagan, Julia. Silent Second Mortgage. 25 02 2021. 30 06 2021 <>.

U.S. Department of Housing and Urban Development . Federal Housing Administration Annual Report to Congress. n.d. 30 06 2021 <>.

Yale, Aly J. Pros & Cons of Down Payment Assistance Programs for Mortgages. 19 05 2020. 30 06 2021 <>.