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How Does Down Payment Assistance Work and How Do I Get It?

How does down payment assistance work?

Down payment assistance is a great solution for one of the biggest barriers to homeownership.

But when first-time buyers investigate further, they find it’s not as simple as it sounds. There are hundreds of programs across the country with different eligibility criteria.

How do you narrow down your options? Once you find a program, does it really eliminate your down payment? Let’s find out.

Narrowing Down Your Options

While there are a few nationwide down payment assistance (DPA) programs, the vast majority are local.

Some are available statewide, while others only work within a county, city, or even certain neighborhoods.

To find programs, simply do a Google search for “down payment assistance [your state].”

This will reveal your state’s housing authority website. It should give you plenty of matter-of-fact information without trying to sell you: its purpose is not to make money.

Look through available programs and eligibility criteria. There may be only one or two programs for which you meet requirements for income level, location, credit score, profession, or other guidelines.

Once you find a potential program, how do you access it?

How Do I Access Local DPA Programs?

Most first-time buyers assume down payment assistance is simply a lump of cash you receive at closing, independent of the loan.

While these exist, DPAs are typically tied to the mortgage program. So you have to get a certain type of mortgage from an approved lender.

Where do you find these lenders? The state should offer a list. Just as an example, you can see approved lenders in:

Cross-reference approved lenders with online reviews. Just because they are on a state list does not mean they are reputable.

Some states also mention how many loans a particular loan officer completed recently. Because these programs can be complex, you want a loan officer and lender that does a lot of them.

The next step may scare you, but it’s unavoidable and perhaps the quickest way to homeownership: speaking with the lender.

Speak With the Lender: Just Do It

The fastest shortcut to checking your eligibility is speaking with a lender who knows the ins and outs of local programs.

You can spend hours on the state’s website, subreddits, Facebook groups, and still wonder if you qualify.

Or you could spend 15 minutes on the phone with 1) someone who actually knows the program, and; 2) someone who can issue you a pre-approval to start shopping for homes.

Talk, don't text: you can figure things out 10 times as fast.

Still, dialing that number strikes fear into first-time buyers. Will you fall for a sales gimmick and end up paying too much or being locked into something?

These are legitimate fears. But keep in mind that you’re never committed to a certain lender or loan officer. And, most mortgage professionals legitimately want to help you get into a home, despite the fact that they will make a commission if the deal closes.

Get on the fast track to homeownership. Save hours or even weeks by making a call.

What Happens After You Speak With a Lender?

If all goes well, you find out you are eligible for down payment assistance.

The next step is applying for the loan the DPA is tied to.

You can do this over the phone or online (after you’ve made contact with the loan officer).

The lender will run your information through a computerized underwriting system. If you’re approved, you will receive a mortgage pre-approval.

Find a buyer’s agent to start viewing homes in your price range.

Make an offer on a home. Keep making offers if the seller rejects yours.

Eventually, you’ll get an accepted offer. The lender will continue processing your loan, order an appraisal, and request additional information from you.

If all goes well, you will sign final loan documents within 30-45 days.

At closing, escrow will receive down payment funds from the state or agency that offers the DPA program. This amount will reduce funds needed to close.

A few days later, the loan closes and you’re a homeowner.

Will I Need to Pay Any Money at Closing?

Getting a down payment assistance program doesn’t mean you won’t need your own money.

This is a big misconception among first-time buyers. Down payment assistance doesn’t always cover all your costs, as seen in the following example.

Home Price


Down Payment (3.5% FHA)


Closing Costs


Down Payment Assistance (5%)


Cash Needed to Close


In this example, DPA covered a large chunk of the cash needed to close, but not all of it.

Speak with your lender upfront about your total cost and how much DPA will cover. Make plans to come up with the difference via savings, gift funds, or other sources.

Other Types of DPA

State-based DPA isn’t the only type.

You can also get assistance that may or may not be attached to a loan program.

For example, following are other sources:

  • Your employer

  • A proprietary program offered by a lender

  • A non-profit

  • A city or county

  • Native American Tribe or agency

If you are not eligible for a state program, it’s time to cast a wider net. Check on Reddit, TikTok, Facebook groups, your city and county website, your employer, and with national lenders. You might be surprised by what you find.

DPA: Worth the Effort

Unlike an FHA loan or conventional loan, there’s no standard set of guidelines that apply nationwide. Rules change from state to state and even city to city.

However, finding a program is worth the effort. Imagine accelerating your homebuying timeline by five years because you found $30,000 toward your down payment.

So follow the steps outline in this article. Soon, you could be a homeowner.

About The Author:

Tim Lucas spent 11 years in the mortgage industry and now leverages that real-world knowledge to give consumers reliable, actionable advice. Tim has been featured in national publications such as Time, U.S. News, MSN, The Mortgage Reports, and more.

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