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Coming up with a down payment for a home can seem impossible, especially if you’re buying your first home. Luckily, there are many grants available to first-time homebuyers to help fill in the gaps in your savings needed to buy a home. These programs are usually offered by banks and nonprofits, but also by state and local governments.
What are the grants for first-time home buyers?
There are many financial assistance options available to first-time homebuyers, but there is one key thing that distinguishes grants from other forms of assistance: grants don’t have to be paid back. They can help with a down payment on your home as well as other costs you need to pay before you move in. Some grant programs are even available to people who have bought homes before.
First-time homebuyer grants are essentially free funds, which means they are different from other types of down payment assistance programs that require you to pay the funds back at some point or live in the home long enough for the funds to be forgiven. First-time homebuyer grants are also different from affordable mortgage programs that come with perks like lower mortgage interest rates or lower mortgage insurance premiums.
How to qualify for first-time home buyer grants
Not all first-time homebuyers qualify for first-time homebuyer subsidies. These programs tend to target people who fall into the low- or moderate-income category of borrowers, and that definition varies by income and where you live.
Eligibility requirements vary, but most grant programs have some common elements, including:
- Income Limits: Many grant programs designate households that earn 80% or less of the Area Median Income (AMI) as “low-income” and limit eligibility to only those households that fall within that range. Income limits also vary by household size.
- House price limits: Again, these limits vary widely by state and local housing market.
- Your Contribution: Many grants aimed at first-time homebuyers stipulate that the buyer must put down some cash – a common requirement is 1 percent of the purchase price or $1,000, whichever is greater.
- Residence Status: Generally, subsidies are only available for purchases of homes that will be used as your primary residence, and not for homes that you rent out to others or use as a second home.
- Further education: Many grant programs require you to complete a homebuyer education course before you can receive funds.
8 First-Time Home Buyer Grants to Consider
1. National Home Buyers Fund
The nonprofit National Homebuyers Fund sponsors grants for down payments and closing costs up to 5 percent of the home’s purchase price. You don’t have to be a first-time homebuyer to qualify, but you do need to find a mortgage lender that participates in the program and will forgive the funds. To find a local lender, contact the organization by calling 866-643-4968.
2. Bank of America Grant Program
Bank of America offers two grant options to help with down payment and closing costs: America’s Home Grant and the Down Payment Grant program. America’s Home Grant provides a loan credit of up to $7,500 for closing costs, while the Down Payment Grant provides up to $10,000 in down payment assistance. However, your mortgage must come from Bank of America, and the Down Payment Grant may count as taxable income.
3. Chase Homebuyer Grant
Chase Homebuyer Grants are available to homebuyers in certain areas of the United States who meet certain census tract requirements. The program offers grants of up to $7,500 that are primarily used to lower interest rates. However, the funds can also be used to pay for fees associated with the mortgage or down payment. Homebuyer Grants are available to applicants seeking a bank DreaMaker loan or a regular FHA or VA mortgage.
4. Wells Fargo Grant Program
Wells Fargo offers two types of grants: down payment assistance through the Homebuyer Access grant and the Dream. Plan. Home. closing cost credit. The former provides up to $10,000 to eligible borrowers in the Atlanta, Baltimore, Charlotte, Dallas, Minneapolis-Saint Paul, New Jersey, New York, Philadelphia and Washington, DC metropolitan areas. The closing cost credit provides up to $5,000 to low-income borrowers in certain areas. As with other grants offered by banks and lenders, to qualify you must get a mortgage from Wells Fargo and meet income and location requirements. You can check your eligibility on the Wells Fargo website.
5. HomeReady and Home Possible Credits
If you plan to get a HomeReady or Home Possible conventional loan between now and February 2025, you may be eligible for a $2,500 credit if your income is in the “very low-income” range (i.e., 50% or less of the median income for your area). The credit can be applied to your down payment or closing costs.
6. State and local first-time homebuyer grants
Many states and cities offer grant programs for first-time homebuyers, especially if you’re relocating for work. Contact your state housing finance agency or real estate agent for more information.
Local mortgage lenders may also be able to introduce you to free funding. For example, First Federal Bank of Kansas City is offering grants of up to $5,000 to qualifying buyers. New York-based ESL Federal Credit Union has a matching program that offers grants of up to $10,500 to Black and Latino first-time homebuyers. Tri-Counties Bank in California is offering up to $30,800 in 4-to-1 matching grants.
7. Good Neighbor Next Door Program
Available to police officers, teachers, firefighters and paramedics, the Good Neighbor Next Door program overseen by the U.S. Department of Housing and Urban Development offers a 50 percent discount on a home in a designated redeveloped area. After living there for three years, you can purchase the property for half the list price and don’t have to pay the discount back.
8. HomePath Ready Buyer Program
The HomePath Ready Buyer program is offered through Fannie Mae. With this program, you can receive up to 3% of the purchase price of your home in subsidies, plus access to closing costs and other savings opportunities. However, there are restrictions on what properties you can buy, and they must be HomePath properties, meaning they’re Fannie Mae-owned. In most cases, they’re foreclosed properties that may need significant renovations.
How to apply for First Time Home Buyer Grants
Most home buying grants require a minimum credit score, and to apply you’ll usually need to provide detailed proof of your income and assets, including at least two months’ worth of recent pay stubs and employment verification.
Depending on the type of grant you want, you may be able to apply for the grant at the same time as you apply for your mortgage. If not, you’ll need to follow the organization’s guidelines. Many grants allow you to start the application process online.
Other assistance for first-time home buyers
If you can’t find a first-time homebuyer grant, you’re still not out of luck: There are other low-cost first-time homebuyer loans and programs available. You might also qualify for a forgivable loan, which can work much the same as a grant (you don’t have to pay the loan back, as long as you meet certain requirements).
Here are some options to consider:
- DPA Second Lien – Down Payment Assisted (DPA) second mortgages are available through many state mortgage lenders. With a DPA second mortgage program, you apply for a 30-year mortgage to finance your home, and then apply for an even smaller mortgage to help with your down payment and closing costs. Like a first mortgage, this second loan has an interest rate (which can be lower than the first loan) and you pay it back over time.
- DPA Deferred Payment Loan – With some programs, you don’t have to start paying back your down payment assistance right away. Instead, you can defer payments until you sell your home, refinance, or pay off your mortgage. During that time, the assistance doesn’t accrue interest, so your debt doesn’t increase.
- DPA Exempt Loans – A forgivable loan is the closest thing to a homebuying grant because it can be forgiven, but only if you live in the home long enough. For example, you could borrow $5,000 for a down payment and reduce the loan balance every month for 10 years. Once you’ve lived in the home for 10 years, the entire loan is forgiven. If you move within that time frame, you’ll have to pay back part of the loan.
- Individual Development Account (IDA) – An IDA is a matching savings account designed for people within a certain job and income range, usually low-income. IDAs are offered through some public housing organizations and private nonprofits and typically provide a dollar-for-dollar match for savings goals, including down payments and closing costs, up to a certain amount.
