First-Time Homebuyer Down Payment Assistance Programs in 2023

The Landscape of Down Payment Assistance

In 2023, first-time homebuyers could choose from thousands of down payment assistance (DPA) programs nationwide. These programs are run primarily by state housing finance agencies, but counties, cities, nonprofits, employers, and lenders also offer assistance. The goal is to bridge the gap between a buyer's available savings and the cash required to close, which typically includes a down payment of 3 to 20 percent of the purchase price plus 2 to 5 percent for closing costs.

Forgivable Loans and Grants

The most common forms of DPA are forgivable loans and grants. Forgivable loans are often structured as zero-interest second mortgages that are reduced or eliminated as long as the buyer keeps the home for a set number of years—commonly five to ten. Grants are direct awards that never need to be repaid. Both reduce a buyer's out-of-pocket cash requirement, which can allow a household to buy sooner or stretch into a better property.

Mortgage Credit Certificates

Another form of assistance is the Mortgage Credit Certificate (MCC), a federal tax credit program administered by state and local agencies. MCCs allow qualifying buyers to claim a portion of their annual mortgage interest—often 20 to 40 percent—as a direct federal tax credit, improving affordability year after year for as long as the home remains the buyer's primary residence and the original mortgage is in place.

Examples of State Programs

State housing finance agencies run some of the most widely used programs. Virginia's HOMEownership Down Payment and Closing Cost Assistance program, for example, provides 10 to 15 percent of the sales price plus up to $2,500 for closing costs to income-eligible first-time buyers. Mississippi's Home4All program offers up to $25,000 in combined assistance. Many state programs pair assistance with 30-year fixed-rate first mortgages originated through approved lenders.

Federal Options

At the federal level, FHA-insured loans let first-time buyers qualify with as little as 3.5 percent down, and the FHA allows down payment gifts from approved sources. VA loans for veterans and eligible service members require no down payment, and USDA loans in rural areas similarly allow 0 percent down. First-time buyers can often combine state or local DPA with FHA, VA, or USDA financing to cover nearly all of their upfront cash requirement.

Eligibility Basics

Down payment assistance programs typically require buyers to meet income limits (usually expressed as a percentage of area median income), buy within program purchase-price limits, and complete homebuyer education from a HUD-approved counselor. Credit score minimums vary by program and lender, often starting around 620 to 640. Most programs define a first-time buyer as someone who has not owned a home in the previous three years.

How to Find Programs

There is no single national database for every DPA program, but several resources help. The Department of Housing and Urban Development's website lists local programs by state. State housing finance agencies publish detailed program rules. Lenders who specialize in first-time buyers often know which programs stack well in their state. Buyers should start research early—some programs have waiting lists or annual funding caps that close applications until the next funding cycle.