Making a down payment on a home isn’t always easy. Even if you make less than the recommended 20% down payment, you’re still likely to have to shell out thousands or tens of thousands of dollars upfront. If you are like many homebuyers, you’ll need help paying for your deposit. That’s where down payment assistance programs come in.Down payment assistance programs (DPAPs) can provide help paying for some, if not all, of your down payment. Often, these programs can be used to help pay for closing costs, too. This may ease the financial burden of coming up with thousands of dollars all at once.

In 2017, the nonprofit NeighborWorks America shelled out $39.2 million to borrowers who needed down payment assistance in the United States. That’s just one of numerous such programs, which means there may be plenty of help for you.

What forms can a DPAP take?

Down payment assistance programs can come as loans or grants. While borrowers normally need to pay back loans, you don’t have to repay grants, though you may need to meet specific requirements to be eligible.

• Grants are considered “gifts” and don’t have to be repaid. The nonprofit National Homebuyers Fund, Inc., is one provider of DPAP grants. Its grants can cover either all or a portion of the down payment cost.Indiana Housing & Community Development Authority also offers a down payment assistance program, called HELPING TO OWN (H2O). It provides a grant of 3.5% to those who want to purchase a home in Indiana.
• Loans come in different forms but are usually second mortgage programs and need to be paid back in a specific time period, normally ranging from five to 30 years. Some loans, called  “silent seconds,” offer deferred payments. One example is the down payment assistance program from the California Housing Financing Agency. The agency offers a second loan, which requires no payments until you sell, refinance or pay off your house in full.There are also forgivable second mortgage programs, such as the Utah’s Down Payment Assistance program, which provides a five-year forgivable loan with deferred payments and 0% interest.

Who is eligible?

Each down payment assistance program has its own qualification requirements, often having to do with your income, the purchase price of the home and the location of the home. For example, the Arizona Department of Housing’s Pathway to Purchase Down Payment Assistance program has an income limit of $92,984.00 and a purchase price limit of $371,936.00.

Keep in mind, you may also be required to take a homebuyer education course before you can qualify, as is the case with the down payment assistance programs from the Connecticut Housing Finance Authority. Other programs may also require financial counseling with an expert to help you understand what is expected when it comes time to repay your loan.

What to watch out for

There may be other restrictions to consider with down payment assistance programs. For example, Utah’s Down Payment Assistance only allows borrowers who have not owned a home within the past three years. Another possible restriction may require you to live at the property as the permanent residence, as with Nevada Rural Housing Authority’s Home at Last™ Down Payment Assistance.

Loans for down payments may come with higher interest rates than mortgages. You may also need to pay for private mortgage insurance each month for as long as it takes to achieve 20% of your home equity.

And since these loans are usually second mortgages, you’ll likely need to qualify for a first mortgage. This holds true with the Connecticut down payment assistance program loan. It requires you to qualify for a mortgage with a lender approved by the program.

Be sure to also keep an eye out for application fees, which sometimes occur with these types of programs. For example, in Connecticut, lenders who work with the down payment assistance program may charge you a $200 application fee.

Finding down payment assistance in your area

No matter where you live or are looking to buy, there are most likely down payment assistance programs. You’ll just have to do a little digging to find them.

A good place to start is by checking out the U.S. Department of Housing and Urban Development website. Here, you’ll be able to search by your state to see which programs, such as grants or loans, are offered in your area. You can also search your city’s department of economic and community development website to see what’s offered there.

Local mortgage lenders can provide some assistance as well. Search online to see which local mortgage lenders are available in your area and contact them directly for more information.

Other assistance programs for professionals or first-time homebuyers.

There are many different assistance programs out there, some specifically for certain types of professionals. HUD’s Good Neighbor Next Door program offers a 50% discount off a home’s listing price to working firemen, police officers, first responders and teachers. Recipients must reside at the property for at least 36 months.

Meanwhile, the PenFed Foundation Dream Makers Grant offers a maximum $5,000 grant to active military or veterans looking to purchase a new home.

As for first-time homebuyers, there are likely many different programs available within the state where you want to live. Those in Nebraska may choose the Homebuyer Assistance (HBA) offered by Nebraska Investment Finance Authority, which can provide down payment assistance of up to 5% of the purchase price — as long as the borrower has not purchased a home within the last three years. Those in New York may be interested in the HomeFirst Down Payment Assistance Program, which can provide up to $40,000 for the down payment (or closing costs) for new homebuyers who will live at the property for 10 years or more.

Conclusion

Down payment assistance programs can benefit people who want to buy a home but may not have the the funds for a large deposit. These programs can help you purchase a home in the area of your choice while lifting a financial burden, sometimes requiring only a fair credit score.

However, there are other eligibility requirements to consider and financial education to partake in along with several restrictions and limitations to abide by. It’s best to always weigh all the pros and cons first before finalizing your decision.