Six myths about down payment assistance

Most of what people believe about down payment assistance is half right, and the wrong half keeps good buyers from looking. The short version: assistance is usually a second loan, not a gift; many programs are open to repeat buyers; several have no income limit; and some help with closing costs too. It is for the home you will live in, and it only works through a lender that takes part in the program.

Here are the six myths I hear most, and what is true instead.

Myth 1: “It’s free money”

It is not. In most programs the assistance is a second loan, recorded behind your first mortgage. The CFPB describes it the same way: a second mortgage on special terms (opens in a new tab) from a local nonprofit or government program. Some programs forgive it after you meet their conditions, such as living in the home for a set time. Others are paid back monthly, or in one sum when you sell, refinance or pay off the first mortgage. Read the terms of the second loan as carefully as the first.

Freddie Mac’s homebuyer site (opens in a new tab) lists the forms assistance takes, and most come with conditions. The good news hidden in this myth: because it is a loan with clear rules, you can plan around it. The two kinds of assistance suit different plans.

Myth 2: “It’s only for first-time buyers”

Not always. Several of the programs we work with have no first-time buyer rule at all. Where a program does have one, “first-time” usually means you have not owned a home in the past three years, so a buyer who sold a home some time ago may count. Some programs also make exceptions in certain areas or for veterans.

Myth 3: “You need a very low income”

Some programs have an income limit, often set by county and household size. Several national programs we work with have no income limit. Check the actual rule for the program before you rule yourself out.

Myth 4: “It only covers the down payment”

Some programs can also cover part of your closing costs, not only the down payment. The CFPB notes that many states and localities help with both (opens in a new tab). That can matter as much as the down payment itself, because closing costs are cash you need on the day you sign. Ask what the assistance can be used for in your program.

Myth 5: “Any lender can offer any program”

Each program works with lenders that take part in it, and the program usually sets rules for the first mortgage as well as the assistance. That means the lender’s list of programs matters. Our down payment assistance page lists the ones we work with, with their main rules in plain words.

Myth 6: “With assistance, I don’t need any savings”

Assistance can cover some or all of the down payment, but you still need a first mortgage that fits your credit, income and debts. Some programs ask you to put in a small amount of your own money, and you may still have costs before closing, such as the appraisal or an inspection. A documented gift from family can often be added, but each program sets its own rules.

What is true about every program

• It is for your main home. Assistance is not for a rental or a second home.
• Funding changes. Program money and terms can change without much notice, so the program is confirmed again before closing.
• Education may be required. Some programs ask at least one buyer to take a homebuyer education course before closing. HUD-approved housing counseling agencies (opens in a new tab) can explain the homebuying process.
• The property type matters. Many programs cover one- and two-unit homes, and some have rules for condos and manufactured homes.

How to check what fits you

Start with the estimator on our down payment assistance page. It asks about the state, your household, your income, the price, the type of home and your credit, and shows which programs may fit and why. A licensed loan officer then checks the programs against your full details before you apply.

Frequently asked questions

Will using assistance change my first mortgage?

The first mortgage still has to meet FHA’s rules and the program’s own rules. Your loan officer explains both before you apply.

Can I use assistance on a home that needs work?

The home still has to pass the FHA appraisal. If it needs repairs, ask before you make an offer: the program and the type of first mortgage decide what is possible.

How long does it take?

The program confirms its funding before closing, so build that step into your timeline. Your loan officer tells you what your program needs and when.

Where do I start?

Run the estimator, then talk to a licensed loan officer about the programs that show “may fit” or “ask us”.