First-Time Homebuyer Grants You Didn't Know Existed
Saving for a down payment is often the biggest hurdle to buying a house. Fortunately, you do not always need to fund it entirely on your own. Hidden state and federal programs provide free money to help you cross the finish line. Let us look at specific grants available right now.
The Difference Between Grants and Loans
When researching down payment assistance, you will see many terms thrown around. It is highly important to understand what you are signing up for.
A true grant provides you with money that you never have to pay back. It is a straight gift to help you close on your home.
Many states also offer forgivable loans. A forgivable loan acts exactly like a grant, provided you meet certain conditions. For example, a state housing agency might give you $10,000 for a down payment. If you stay in the home for a specific period (often three to five years), the debt is entirely erased. If you sell the house before that time is up, you must repay a portion of the money.
National Programs You Should Check First
While local programs are highly localized, a few national initiatives provide massive discounts and cash assistance to first-time buyers.
The National Homebuyers Fund (NHF)
The National Homebuyers Fund operates in all 50 states. It provides down payment and closing cost assistance up to 5% of your total loan amount. If you buy a $300,000 home, that equals $15,000 in assistance. The money is offered either as a true grant or a forgivable loan. You do not even have to be a strictly first-time homebuyer to qualify for this program, though many first-timers use it.
HUD Good Neighbor Next Door Program
The Department of Housing and Urban Development (HUD) runs a highly specific program for community workers. If you are a teacher, police officer, firefighter, or emergency medical technician, you can buy a home in a designated revitalization area at a 50% discount.
If HUD lists a home for $200,000, you can buy it for $100,000. The remaining $100,000 is held as a silent second mortgage. You do not pay interest on this second mortgage. If you live in the home as your primary residence for 36 months, the second mortgage is completely forgiven.
State-Specific Grants for Down Payments
State housing finance agencies are the best sources for hidden grants. Every state has one, and they manage millions of dollars specifically meant to help residents buy homes.
California: Forgivable Equity Builder Loan
The California Housing Finance Agency (CalHFA) offers the Forgivable Equity Builder Loan. This program gives first-time homebuyers up to 10% of the purchase price of the home. You can apply this money to your down payment or closing costs. The loan has a 0% interest rate and is entirely forgiven if you occupy the home as your primary residence for five years.
Texas: TSAHC Down Payment Grants
The Texas State Affordable Housing Corporation (TSAHC) provides assistance to specific groups, including teachers, police officers, veterans, and low-to-moderate-income families. Their “Homes for Texas Heroes” and “Home Sweet Texas” programs provide a grant of up to 5% of the loan amount. Since it is a true grant, no repayment is ever required.
New York: SONYMA Down Payment Assistance
The State of New York Mortgage Agency (SONYMA) offers a Down Payment Assistance Loan. While called a loan, it functions like a grant over time. Buyers receive up to $3,000 or 3% of the home purchase price (capped at $15,000). It carries no interest and requires no monthly payments. The entire balance is forgiven after 10 years of living in the home.
Private Bank Grants for First-Time Buyers
You do not have to rely strictly on the government for free money. Several major commercial banks now offer generous homebuyer grants to attract mortgage customers.
Bank of America Programs
Bank of America currently offers two highly attractive programs that can be combined. Their Down Payment Grant program provides up to 3% of the home purchase price (up to $10,000) to be used for a down payment. In addition, their America’s Home Grant provides up to $7,500 that can be applied to non-recurring closing costs. You do not have to repay these funds.
Chase Homebuyer Grant
Chase Bank offers a Homebuyer Grant of up to $7,500 when you buy a home in certain eligible neighborhoods. The bank uses census tract data to determine eligibility. You can use the money to buy down your interest rate or cover your closing costs. Like the Bank of America program, these funds do not need to be repaid.
How to Qualify for Free Down Payment Money
Every program has its own rulebook, but most follow a similar set of guidelines. To get your hands on a down payment grant, you usually need to meet the following criteria.
- First-Time Buyer Status: Most programs define a first-time buyer as someone who has not owned a primary residence in the past three years.
- Income Limits: Grants are typically aimed at low-to-moderate-income buyers. Your income usually cannot exceed 80% to 120% of the Area Median Income (AMI) for your county.
- Credit Score Minimums: You cannot have terrible credit. Most state and national programs require a minimum credit score of 620 to 640.
- Homebuyer Education: Almost every grant requires you to complete a HUD-approved homebuyer education course. These courses cost around $50 to $100 and take a few hours to complete online.
To access these funds, you cannot just walk into any bank. You must work with an approved participating lender. State housing agencies list their approved mortgage lenders on their official websites.
Frequently Asked Questions
Do I have to pay back a homebuyer grant? No. A true grant never requires repayment. However, if your assistance is structured as a forgivable loan, you must live in the house for a set number of years (usually three to five) before the debt is erased.
Who qualifies as a first-time homebuyer? In the mortgage industry, you are considered a first-time homebuyer if you have not held an ownership interest in a primary residence during the past three years. If you owned a home five years ago but have been renting since, you qualify again.
Can I combine multiple grants? Yes. This is often called “stacking.” You can frequently combine a state down payment grant with a private bank grant or a closing cost assistance program. Your loan officer can help you stack these programs to maximize your free money.