How Does Down Payment Assistance Work?
A closer look at the programs, structures, and requirements behind down payment assistance.
Programs We Work With
There isn't just one down payment assistance program, there are many, and which ones you may qualify for depends on your loan type, credit, and where you're buying. We work with a range of programs, including but not limited to Click n Close, Chenoa Fund, Home Plus, and Home in 5, among others.
Credit Score Requirements Vary by Program
Each program sets its own minimum credit score, separate from your loan program's own requirements. Chenoa Fund, for example, allows a credit score as low as 600. Most other programs, including Home Plus and Home in 5, generally require a credit score in the 640 to 660 range. Meeting your loan program's minimum doesn't automatically mean you'll meet a specific assistance program's minimum, so it's worth checking both together.
Grants: Money You Don't Repay, But Limited by Funding
Some assistance comes in the form of a grant, meaning money you don't have to pay back. Grants are typically funded through a state or local housing authority's budget, and that funding is limited. Once a program's allocated funds for the year (or funding cycle) run out, the grant becomes unavailable until it's refunded, even if you'd otherwise qualify. Because of this, grant availability can change, and it's worth confirming current funding status rather than assuming a specific grant will be there when you're ready to close.
Second Mortgage Options: Not All Structured the Same
When assistance isn't a grant, it's usually structured as a second mortgage behind your primary loan. These can work very differently depending on the program.
Deferred
No monthly payments are required. The balance becomes due when you sell, refinance, pay off your first mortgage, or no longer live in the home as your primary residence.
Forgivable
An interest-free loan that's gradually or fully forgiven if you stay in the home and meet the program's requirements, such as a set number of consecutive on-time payments or years of occupancy. If you sell, refinance, or move out before that period is up, some or all of the balance may become due.
Fully Amortized
This works like a regular loan, with its own monthly principal and interest payment over a set term, paid alongside your first mortgage payment.
Amortized with a Balloon Payment
Smaller regular payments (or none at all) for a period, followed by a large lump-sum payment due at the end of the term or when a triggering event occurs.
Rates & Fees Vary by Program
Each assistance program sets its own interest rate for repayable options, and may charge its own processing or administrative fees separate from your first mortgage's closing costs. Because of this, it's important to compare the total cost of an assistance option, not just the amount of cash it provides upfront.
Is Down Payment Assistance Right for You?
With so many programs, structures, and requirements, the best way to know what you actually qualify for is to review your credit, loan type, and location together.
Common Questions
What down payment assistance programs do you work with?
We work with a range of programs, including but not limited to Click n Close, Chenoa Fund, Home Plus, and Home in 5, depending on your loan program and location.
What credit score do I need for down payment assistance?
It depends on the program. Chenoa Fund allows scores as low as 600, while most others, including Home Plus and Home in 5, generally require 640 to 660.
Is down payment assistance free money?
Some of it is, in the form of a grant, but grants are limited by available funding and can run out. Other options are structured as a second loan that may need to be repaid under certain conditions.
What's the difference between forgivable and deferred assistance?
A deferred loan becomes due when you sell, refinance, or move out, regardless of how long you've stayed. A forgivable loan is wiped out entirely once you meet the program's occupancy or payment requirements.
Do all down payment assistance loans have the same interest rate?
No. Each program sets its own rate and fees, which is part of why comparing total cost matters more than just the amount of assistance offered.