The best first-time buyer programs in 2026 are rarely advertised on billboards. They are run by state housing finance agencies, cities, counties and nonprofits, and they quietly hand out grants and second mortgages that cover some or all of a down payment. There are thousands of down payment assistance programs across the United States, and many eligible buyers never apply because they assume they earn too much or their credit is too weak.
This guide explains how down payment assistance (DPA) works, which mortgages accept lower credit scores, and how to find what is available for your address and income.
This article is general information, not financial advice. Program funding, income limits and terms change often, so confirm details with the agency or a HUD-approved housing counselor.
What is down payment assistance, and how does it work?
Down payment assistance is money from a public agency, nonprofit or lender that covers part of your down payment and, often, closing costs. It almost always comes paired with a first mortgage from a participating lender, and arrives in four main forms.
| Type of assistance | How it works | Do you repay it? | Watch for |
|---|---|---|---|
| Grant | Funds given at closing, often 2–5% of the loan or a fixed dollar amount | No | May come with a slightly higher interest rate on the first mortgage |
| Forgivable second mortgage | A 0% second loan forgiven after you stay in the home for a set period, commonly 3–10 years | Only if you sell, move out or refinance early | Forgiveness schedule — all at once or a portion each year |
| Deferred-payment second mortgage | A 0% “silent second” with no monthly payments | Yes, in full when you sell, refinance or pay off the first mortgage | It reduces your proceeds when you sell |
| Repayable second mortgage | A low-interest loan repaid monthly, often over 10 years | Yes, monthly | The second payment counts in your debt-to-income ratio |
Some agencies also offer Mortgage Credit Certificates, which convert part of your mortgage interest into a federal tax credit of up to $2,000 a year for as long as you live in the home, and matched savings accounts that add two or three dollars for every dollar you save toward a down payment.
Who qualifies for first-time buyer programs?
Every program sets its own rules, but most share these features:
- First-time buyer status. Usually defined as not having owned a principal residence in the past three years. Many programs waive this for veterans or for homes in targeted areas, and some are open to repeat buyers.
- Income limits. Commonly 80–120% of area median income, adjusted for household size — and sometimes higher in expensive metros.
- Purchase price limits that vary by county.
- Minimum credit score, often 620–640, though some accept lower with an FHA first mortgage.
- Homebuyer education. A course of a few hours, online or in person, usually costing under $100 or nothing at all.
- Owner occupancy as your primary residence.
- A small contribution of your own, such as $1,000 or 1% of the price, in some programs.
On immigration status, requirements follow the underlying first mortgage and the agency’s own policy. Lawful permanent residents are generally eligible everywhere; rules for work visa holders, DACA recipients and ITIN filers vary by agency, so ask directly.
State housing finance agency programs
Every state, plus the District of Columbia, has a housing finance agency (HFA), and nearly all run a first-time buyer program that combines a competitively priced 30-year fixed mortgage with DPA. They work through approved private lenders, so you apply at a bank, credit union or mortgage company on the agency’s list, not at the agency itself.
Well-known examples include CalHFA in California, the Texas State Affordable Housing Corporation and TDHCA in Texas, Florida Housing, SONYMA in New York, IHDA in Illinois, OHFA in Ohio and PHFA in Pennsylvania. Assistance is typically 3–5% of the loan amount, or a flat sum often in the range of $5,000–$15,000, with some targeted programs offering more for specific professions or neighborhoods.
Two practical points. First, funding is limited: popular programs sometimes pause when the year’s money runs out, so ask your lender whether funds are currently available. Second, some loans funded by tax-exempt bonds carry a federal “recapture tax” if you sell within nine years at a profit and your income has risen sharply. It affects few people, and some agencies reimburse it.
City, county and nonprofit programs
Local governments often layer their own assistance on top of state help, funded by federal HOME and Community Development Block Grant money. These programs can be generous — tens of thousands of dollars in expensive cities — but have stricter income limits, waiting lists and sometimes resale restrictions. Community land trusts, Habitat for Humanity affiliates and NeighborWorks organizations are also worth a call, and some large banks offer their own grants in selected markets — ask every lender what they have.
Low down payment mortgages that pair with assistance
HomeReady and Home Possible
Fannie Mae’s HomeReady and Freddie Mac’s Home Possible are conventional loans built for low- and moderate-income buyers. Both allow 3% down, require a minimum score of around 620, cap borrower income at 80% of area median income, and charge less for private mortgage insurance than a standard conventional loan. The entire down payment can come from gifts, grants or approved second mortgages, and PMI can be cancelled once you reach 20% equity. If you earn above the limit, the standard 97% conventional loan has no income cap as long as one borrower is a first-time buyer.
FHA loans
FHA remains the main route for buyers with lower scores: 3.5% down with a score of 580 or more, or 10% down with 500–579. The full 3.5% may come from an approved DPA program or a family gift, which is why FHA is the first mortgage behind many state programs. We compare FHA, VA, USDA and conventional loans in full, including closing costs and rules for visa holders, in our guide to buying your first home in the USA.
VA, USDA and Section 184
VA and USDA loans already require no down payment, but DPA can still cover closing costs. Native American and Alaska Native buyers should also look at HUD’s Section 184 Indian Home Loan Guarantee program, which offers low down payments and flexible underwriting through approved lenders.
Good Neighbor Next Door: 50% off for public servants
HUD’s Good Neighbor Next Door program sells certain HUD-owned homes at a 50% discount off the list price to full-time law enforcement officers, pre-kindergarten to grade 12 teachers, firefighters and emergency medical technicians. The catches are significant: the homes must be in designated revitalization areas, inventory is small and changes weekly, buyers are chosen by random selection when more than one applies, and you must live in the home for 36 months. The discount is secured by a silent second mortgage that is released after the three years. Listings are on HUD’s home store, linked from hud.gov.
Options if your credit score is low
A score under 620 narrows your choices, but it does not end them.
- FHA with manual underwriting. Some lenders will approve scores in the 500s with solid rent history, stable income and cash reserves. Expect to call several lenders; many set their own minimum at 580 or 620.
- VA loans have no official minimum score, and some lenders go below 620 for veterans.
- Nontraditional credit. If you have no score at all, which is common for recent immigrants, lenders can build a file from 12 months of rent, utility and phone payments.
- Fix before you buy. Paying card balances below 30% of their limits, disputing errors and avoiding new accounts for six months can lift a score enough to cut your rate and mortgage insurance meaningfully. See our guides to getting loan approval with a low credit score and home loans with bad credit.
Be careful with “credit repair” companies that charge upfront fees or promise to delete accurate information. Nonprofit housing counselors do the legitimate parts of that work for free.
How to find down payment assistance near you, step by step
- Start with your state HFA. Search for “[your state] housing finance agency” and open the homebuyer page. Note the income limits for your county and household size.
- Check HUD’s state pages. HUD lists local homebuying programs by state on hud.gov.
- Call a HUD-approved housing counseling agency. Counselors know which local programs still have money. Find one through the search tool on consumerfinance.gov or HUD’s counseling line.
- Choose a lender from the agency’s approved list and ask the loan officer how many DPA loans they closed last year.
- Take the homebuyer education course early. Certificates are usually valid for a year.
- Compare the full package. Ask for a Loan Estimate with DPA and one without, and compare rate, monthly payment, cash to close and what you would owe if you sold in five years.
Is down payment assistance always worth it?
Usually, but not automatically. Assisted loans often carry an interest rate a quarter to half a percentage point higher than the lender’s best rate, and a deferred second mortgage must be repaid when you sell. If you can afford the down payment yourself, run the numbers both ways. DPA also adds paperwork, so allow 45 days or more to close.
The benefit is still substantial: buying years sooner than you could by saving alone, and keeping cash for repairs and emergencies. Once you own, protect the budget by shopping carefully for homeowners insurance.
Scam warning
Real assistance programs never ask you to pay a fee to “unlock” a grant, never contact you first through social media, and never guarantee approval. Applications run through approved lenders, government agencies or HUD-approved nonprofits. If someone offers a government housing grant in exchange for an upfront payment or gift cards, it is fraud — report it to the FTC.
Frequently Asked Questions
Can I combine more than one assistance program?
Often, yes. It is common to stack a state HFA second mortgage with a city grant and a Mortgage Credit Certificate, as long as each program allows it and the combined loans stay within the first mortgage’s limits.
Do I have to be low-income to qualify?
No. Many programs reach up to 120% of area median income or higher, which covers middle-income households in most metros. Check the published limit for your county and household size before ruling yourself out.
Is down payment assistance taxable income?
Generally, assistance from government and nonprofit programs used to buy a home is not treated as taxable income to the buyer, but individual situations differ. Ask a tax professional if the amount is large or comes from an employer.
What happens if I refinance or move out early?
Deferred loans typically become due, and forgivable loans may have to be repaid in part or in full if the forgiveness period has not ended. Some agencies will subordinate their loan so that you can refinance to a lower rate; ask before you apply.
Bottom line
The best first-time buyer programs are local. Begin with your state housing finance agency, add city or county grants, pair them with HomeReady, Home Possible or FHA depending on your credit, and let a HUD-approved counselor check your plan. Down payment assistance will not make an unaffordable home affordable, but for buyers with steady income and thin savings, it can turn a five-year wait into a purchase this year.