Homeownership assistance: How to get help from a variety of sources
Affordability challenges are rampant for home buyers due to the perfect storm of low inventory, high demand, rising prices and mortgage rates stubbornly stuck above 6 percent. For first-time buyers, accumulating the cash needed to become a homeowner can be particularly difficult. Unlike repeat buyers, they don't have a home to generate funds for the down payment and closing costs for a new home.
A fortunate one-quarter of first-time buyers used a gift or loan from a relative or friend for their down payment funds in 2024, according to the National Association of Realtors' 2024 Profile of Home Buyers and Sellers. For home buyers without access to financial help from friends and family, there are thousands of programs that provide homeownership assistance from government and nonprofit organizations, employers and financial institutions. As of the fourth quarter of 2024, there were 2,466 programs available nationwide, 81 percent of which were actively funded, according to Down Payment Resource's Q4 2024 Homeownership Program Index report.
'Sometimes people think they make too much money to qualify for homeowner assistance or that they won't qualify for another reason,' said Yvette Thomas, senior director of the homeownership center at Manna Homes in D.C. 'Everyone should ask questions of their lender and their real estate agent and research home buyer programs in the location where they want to buy. In D.C., the maximum income for [the Home Purchase Assistance Program] is $180,800.' Buyers may qualify for the DC Open Doors program with an income of $200,000 or more.
Nearly all home buyer assistance programs require applicants to take a home buyer education class, so Thomas recommends prospective buyers start there. The classes offered by state and local housing finance agencies are usually free or low cost and include information about how to access down payment assistance and other programs.
'At Manna, we offer a closing cost assistance grant program to housing counselor clients,' Thomas said.
A local housing counselor certified by the U.S. Department of Housing and Urban Development can provide advice about home buyer assistance.
'Taking a first-time buyer class is helpful for people to build their comfort level with the process of buying a home, which is complicated,' said Karen Serfis, a HUD-approved housing counselor with the Latino Economic Development Center in Arlington, Virginia. 'The more educated you are about buying a home, the better equipped you are to ask the right questions.'
State and local housing agencies typically have a list of lenders approved to offer home buyer assistance to borrowers, Serfis said. Buyers who don't have a lender can search the lists and interview lenders.
'The important thing to realize is that one size doesn't fit all — there's a lot of variety in what's available and who qualifies,' said Scott Phillips, a branch manager with Embrace Home Loans in Annapolis. 'These programs are intended for low-to-moderate income buyers, but income limits are tied to household size. Some programs are stricter than others, but the main thing is that everyone must qualify for the mortgage as well as for assistance.'
Phillips recommends that prospective buyers research home buyer assistance before they look for a home because qualifying for the down payment or closing cost help can change their price range and financing options.
'If you need assistance to buy, allow yourself at least three months to go through the home buyer education and application process,' Phillips said.
Prospective buyers can search for down payment assistance and other home buyer options at DownPaymentResource.com by location.
'Home buyer assistance for down payment and closing costs can be in the form of a loan or a grant,' said Mike McBride, president and loan officer at GenPoint Mortgage, headquartered in Reston, Virginia. 'Besides getting help from a government or nonprofit organization, most big banks and private lenders offer down payment assistance with conventional financing backed by Fannie Mae and Freddie Mac or with FHA financing.'
Home buyer assistance grants do not need to be repaid. Many loans are also forgivable after the buyers have lived in a property for a certain period. Others are only repaid when the property is refinanced or sold.
'The Maryland Mortgage Program offers up to 5 percent of the sales price, but it always must be repaid,' Phillips said. 'Loans for home buyer assistance from the Federal Home Loan Bank are usually forgiven after five years. Grants from nonprofit organizations like the Wider Path Home Foundation are often forgiven immediately.'
In Virginia, a 2 percent grant is available to qualified borrowers from Virginia Housing that does not to be repaid, Serfis said.
'In Arlington County, down payment assistance is available as a loan to borrowers with an income of 80 percent or less of area median income, which only needs repayment when the house is sold,' Serfis said. That income could be as high as $143,600 depending on the household size.
Home buyer assistance programs can often be stacked, so if a borrower qualifies for more than one option, they may be able to accumulate funds to pay all of their down payment and closing costs, Phillips said.
'It's pretty unusual, but I was able to help one buyer in Baltimore qualify for $27,900 from four programs, which came to 17 percent of the $160,000 purchase price,' Phillips said.
However, financial assistance directly from a bank typically can't be stacked the way government programs can, Serfis said.
Depending on the specifics of the program, home buyer assistance funds can be used for more than just down payment and closing costs.
'Some programs allow you to use the funds to pay your buyer's agent commission or buy down your mortgage rate with extra cash at the closing,' Thomas said.
Some home buyer assistance funds can be used to buy a duplex or a building with up to four units, as long as the borrower will live in one as their primary residence.
Even with home buyer assistance, most buyers will need some cash for a deposit when they make an offer to buy a home, McBride said.
Home buyer assistance program details and requirements vary widely and sometimes change. Many, but not all, are reserved for first-time home buyers. However, the federal definition of a first-time home buyer, which most programs follow, is anyone who has not owned a home within the past three years.
'Income limits are usually 80 percent to 100 percent of area median income on a sliding scale based on household size,' Serfis said.
Typically, McBride said, state home buyer assistance programs allow for down payment and closing cost assistance with a second loan of up to 5 percent of the home price when the borrowers qualify for FHA financing.
'Lender-offered assistance is different than the government programs and is sometimes available to households with higher incomes,' McBride said. 'For example, in D.C. you may qualify for assistance even with an income of up to $214,000.'
In addition to income limits, borrowers typically must meet the following eligibility criteria:
'Since some programs run out of funding midway through the year or earlier, ideally borrowers will apply for home buyer assistance as soon as they feel ready,' Thomas said. 'Some programs such as HPAP are now by lottery only, so if a prospective buyer wins that lottery, they will have six months to use the funding.'
A housing counselor and homeownership education help potential home buyers prepare with a budget and savings plan as well as updated information about assistance programs.
'It can be hard to navigate these programs,' Thomas said. 'We get notified if a program is getting low on funds and we prepare our clients so they are ready to apply whenever we identify a program that could help them.'
Researching home buyer programs can be a game changer when it comes to financing a home purchase.
Down Payment Resource's searchable database
Ask a lender to search Freddie Mac's DPA One database
D.C. Department of Housing and Community Development Home Purchase Assistance Program
D.C. Housing Finance Agency DC Open Doors Program
Maryland Department of Housing and Community Development Maryland Mortgage Program
Virginia Department of Housing and Community Development Homeownership Down Payment Assistance Program
Virginia Housing Home buyer programs
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