For many future homebuyers, the hardest part of purchasing a home isn’t finding the right place, it’s saving up for a down payment and closing costs. Down payment assistance programs can help renters become homeowners sooner by covering part or all of these upfront costs.
In this Redfin article, we’ll cover 10 pros and cons of down payment assistance. Whether you’re looking to buy a home in Anaheim, CA, or a townhouse in Atlanta, GA, you’ll have the answers about whether down payment assistance is right for you.
Key takeaways
- Down payment assistance can help make buying a home more affordable.
- Loans, grants, and credits are the three main types of assistance programs.
- Pros: Buying a home sooner, deferred repayment, less financial strain.
- Cons: Qualification and occupancy requirements, longer closing, paying more over time.
What is down payment assistance?
Down payment assistance helps lower the cost of buying a home by reducing the down payment or closing costs. These programs are offered at the federal, state, and local levels, and are often aimed at first-time buyers or those with low-to-moderate incomes.
Types of down payment assistance programs
There are three main types of down payment assistance programs:
- Loans: These are often second mortgages that help you cover your down payment or closing costs. They’re typically deferred-payment loans, meaning you don’t have to repay them until you sell, refinance, or pay off your first mortgage. Some loans can be partially forgiven after living in the home for a certain amount of time.
- Grants: Typically, you don’t have to pay back grants. However, you may need to meet specific eligibility rules, such as income caps or staying in the home for a certain period, for the grant to be fully forgiven.
- Credits: Also called “mortgage credit certificates,” credits help reduce the amount you pay in federal taxes on your mortgage interest. State or local housing agencies usually issue…