Down Payment Assistance in 2026: Grants, Forgivable Loans, and State Programs — How They Work

Published 2026-11-08 · eLoanTree Blog

For many first-time buyers, the down payment is the hardest part of buying a home. Saving tens of thousands of dollars while paying rent can take years. Down payment assistance, usually called DPA, exists for exactly that gap: programs that give or lend buyers money for the down payment, and sometimes for closing costs too.

This guide explains how DPA works in general, the different types, and where to check whether you qualify — without naming any single program, because details change by state, county, and year.

1. What down payment assistance is

Down payment assistance is money provided by a government agency or a nonprofit — most commonly a state housing finance agency, a city or county government, or a local nonprofit — to help a buyer cover the cash needed upfront to buy a home.

It can cover part or all of the down payment, and in some programs it can also cover closing costs. It is not a product you buy from a bank. It is a program you qualify for, usually alongside a regular first mortgage such as an FHA loan or a conventional loan.

Most DPA programs are aimed at first-time buyers — usually defined as someone who has not owned a primary residence in the last three years, with exceptions for single parents and displaced homemakers. Programs also commonly set income limits and home price limits.

2. The main types of assistance

Programs come in several shapes, and the shape matters more than the name. Two programs that both offer the same dollar amount can be very different if one is a grant and the other is a loan you must repay.

Grants. A grant is money you generally do not have to repay, as long as you meet the program's conditions — usually living in the home for a required period. Grants are the simplest form of assistance, and also the hardest to find in large amounts. Read the terms carefully: some programs called "grants" are really forgivable loans.

Forgivable second loans. This is the most common structure. The assistance is recorded as a second mortgage, but it is forgiven over time if you keep living in the home for the required period, often several years. If you sell or move out before then, you may have to repay some or all of it — read the forgiveness schedule before you sign.

Deferred-payment second loans. You make no monthly payments, but the full amount becomes due when you sell, refinance, or pay off the first mortgage. It is postponed, not forgiven — a debt that will come due later.

Repayable second loans. Some programs lend the money as a second mortgage with monthly payments, usually at a low or zero interest rate. This is the least generous form, but it can still help if the payment is small and the alternative is waiting years to save.

3. What DPA usually requires

Almost every DPA program asks for some combination of the following — treat this as a checklist to investigate, not a promise that you qualify.

Income and price limits. Most programs set a maximum household income and a maximum purchase price, set by county, so the same income can qualify in one county and not in another.

A minimum credit score. Programs commonly require a minimum score, often higher than the minimum for the first mortgage alone.

Homebuyer education. Nearly every DPA program requires you to complete a homebuyer education course before closing, often an eight-hour course from a HUD-approved provider, available online or in person. Do this early — it is a requirement, not a suggestion.

An approved lender and an approved first mortgage. Not every lender works with every program. Each program publishes a list of participating lenders, and only those lenders can close a loan with that assistance. If your lender does not participate, you may need to switch lenders to use the program.

Owner occupancy. You must live in the home as your primary residence. DPA is for people buying a home to live in, not for investors.

4. Where to check for programs

Because programs are local, there is no single national list that tells you what you qualify for. Start with these sources, in this order:

1. Your state housing finance agency (HFA). Every state has one. The National Council of State Housing Agencies (NCSHA) keeps a directory; your state HFA's website lists its DPA options, income and price limits by county, and approved lenders. This is the most useful starting point.

2. Your city and county housing department. Many cities and counties run their own assistance, sometimes funded through HUD programs, and local assistance can sometimes be combined with a state program. Ask directly whether combining is allowed.

3. HUD's homebuying resources. HUD's website links to state and local programs by state, and to HUD-approved housing counselors. HUD itself does not give down payment grants directly to individual buyers. If someone promises you a federal grant in exchange for a fee, check with your state HFA before paying anything.

4. A HUD-approved housing counselor. Counselors know the programs in your area and can walk you through eligibility, often at little or no cost. Find one through HUD's counselor search. A counselor can also help you with the homebuyer education course many programs require.

5. A participating lender. Once you have a shortlist, talk to a lender on the program's approved list. Only that lender can tell you whether the assistance works with the first mortgage you want.

5. The trade-offs to watch for

DPA is real help, but it is not free money without strings. The most common surprises are these:

The assistance can affect your loan. Some first mortgages pair easily with DPA and some do not. Ask the lender to show you the full picture — first mortgage plus assistance — not just the down payment help in isolation.

Selling early can cost you. With a forgivable or deferred second loan, moving out or selling before the required period ends can trigger repayment. Read the forgiveness schedule carefully first.

Program money runs out, and rules change often. Many DPA programs have limited funding and close when the money is gone. Confirm current terms with the agency and an approved lender before you make an offer that depends on the assistance.

6. A sensible order of operations

First, check your state HFA's website for your county's programs and limits. Second, complete the homebuyer education course early. Third, ask a participating lender to run your file with and without the assistance. Fourth, make your offer knowing how much cash you still need to bring — even with assistance, you will usually need some of your own money.

Down payment assistance does not make a home affordable on its own. It closes a gap. But for a buyer who can afford the monthly cost and is short on the upfront cash, it can be the difference between waiting years and buying now.

Sources: DPA types (grants, forgivable second mortgages, deferred-payment seconds, repayable seconds) and where to find programs (state housing finance agencies via the NCSHA directory, city/county housing departments, HUD state pages, HUD-approved housing counselors) — NerdWallet, "Down Payment Assistance: How It Works, Where to Find It" (updated March 10, 2026), and MyMortgageInsider, "Down Payment Assistance Programs: How They Work" (2026), both accessed November 2026. FHA 2026 limits for context: low-cost floor $541,287 and high-cost ceiling $1,249,125 for one-unit properties (HUD Mortgagee Letter 2025-23). FHA down payment rules: 580+ = 3.5% down, 500–579 = 10% down (HUD Handbook 4000.1).

Educational only — eLoanTree is not a lender or broker and does not make loan decisions, guarantee rates or approval, or collect documents or SSNs.