There are many ways to get financial assistance to buy a home. Cities, states, and non-profits offer programs to help buyers based on need.
The average cost of renting has shot up by more than 30% from 2019 to 2023, according to an analysis done by StreetEasy and Zillow.
If you’re ready to escape your landlord’s rising rents, consider buying a home this year.
Before you dismiss the idea because of the upfront cash you’d need, know that there are ways to purchase a house with little to no money down. In addition to using a no or low down payment loan, financial assistance to buy a home exists throughout the country.
Buying a home is much more achievable than most people realize. And with rent prices ever on the rise, there's no better time to get it done than the present.
A recent Fannie Mae poll showed that only 14% of Americans surveyed believe it’s a good time to buy a home. This view is understandable, given all the headlines about high interest rates and home prices. But those data points don't account for everything going on in the housing market today.
Many Americans don’t realize they are qualified to buy a home right now, likely with less money upfront than they’d expect. By delaying a home purchase, they miss out on building equity — and on saving tens of thousands of dollars in the long-term.
Let us explain. Rates have started to creep down from their recent highs, which means you can lock in a lower interest rate if you opt for a fixed-rate mortgage. Even if interest rates race upward during the next few years, you will pay the same low rate for the entire duration of the loan if you buy a home now.
And yes, inflation is a concern, but that has also started to come down slowly. The low interest rates and high demand for houses since 2020 drove up home values, making it difficult for many first-time homebuyers to compete.
But that’s another reason to buy now, if you can. If housing prices continue to go up, you don’t benefit from waiting. You can buy a home now and start gaining equity, which is a building block of not only your own wealth, but generational wealth.
Even if you have to buy a house that’s a little smaller or older than your dream home, it’s still likely a better decision than renting. Rental prices can increase, and many times do on a yearly basis, whereas with a fixed-rate mortgage, you can stabilize your monthly housing payment. Plus, you’re building equity.
Finally, waiting to buy could put homeownership out of reach. We know that interest rates always fluctuate and home prices are always changing, but tend to trend upward long-term. A home that is within your budget today could be out of reach only months from now.
So again, if you are ready to buy a home, do not wait to get started — especially if the only thing holding you back is the thought that interest rates will go down in the future or that you can't afford the up-front expense.
There are many types of financial assistance to buy a home.
Before you look into assistance programs, it helps to know that there are many zero and low down payment loans, especially for first-time homebuyers.
State and local governments, along with various nonprofit organizations throughout the U.S., offer down payment assistance (DPA)*** and closing cost assistance programs.
“Many states offer down payment assistance programs that, if eligible, allow you to buy a home with 0% out of your pocket,” says Garett Seney, a Fairway branch manager in South Boston. “Connecting with a knowledgeable loan officer will benefit you to find out what programs you qualify for.”
The grants and loans you can get through these programs vary widely by location. Some offer money through forgivable loans, “silent second” mortgages that you only repay when you sell or refinance the home, or grants that require no repayment at all.
Many states offer down payment assistance programs that, if eligible, allow you to buy a home with 0% out of your pocket.
Each program has its own eligibility requirements, including for income, geography, credit score, and mandatory homebuyer counseling. Your mortgage lender or real estate agent may be able to refer you to down payment assistance programs in your area. Additionally, you can contact the local office of the U.S. Department of Housing and Urban Development (HUD), and speak with a counselor about the programs available where you live.
Click here for our state-by-state down payment assistance guide.
Low- and moderate-income homebuyers throughout the U.S. can apply for Freddie Mac’s BorrowSmartSM program which could provide up to $2,500 toward your down payment or closing costs.
This program works in combination with Freddie Mac’s Conventional 97 HomeOne and Home Possible mortgages, which allow for 3% down payments. The “97” refers to the loan-to-value ratio (LTV): you’re borrowing 97% of the home’s purchase price and putting 3% down.
The BorrowSmart program will likely not cover all of your down payment or closing costs, but you can combine it with gift funds or other forms of assistance.
Learn more: Freddie Mac BorrowSmart℠ Program: Up to $2,500 in Closing Assistance
Several nonprofit organizations offer special loan programs for first responders, firefighters, law enforcement officers, and public school teachers.
The Good Neighbor Next Door program, for example, offers homes at a 50% discount to teachers, law enforcement officers, and EMTs. Only certain properties qualify for this discount, but saving 50% can be a game-changer for purchasing a home.
Homes for Heroes is another program that helps public servants save money through a series of discounts that average $2,400 per homebuyer, according to the agency’s website. Fairway offers another program called American Frontline Rewards, which also offers discounts to veterans and active-duty military members, first responders, medical professionals, police officers, firefighters and teachers.
Learn more: Home Loans for First Responders: How America’s Heroes Can Get a Piece of the American Dream
While there’s no single national program to help homebuyers who have disabilities, you may be able to find local programs in your area that can help.
You may also come across disability-specific assistance programs. The Travis Roy Foundation, for example, offers grants to homebuyers who experienced a sudden spinal cord injury and need to buy a different home.
Or, if you can afford to buy a home but can’t afford the cost of mobility renovations or other changes to make the property more accessible, a variety of grant programs offer financial assistance for these purposes.
Many loan programs allow your friends or family members to give you money for your down payment or closing costs. If someone in your life wants to help you on your homeownership journey, this can be a great way to do it.
If you will receive gift funds toward your down payment and closing costs, let your lender know as soon as possible. They will tell you the specific procedures you and the donor will need to follow, based on the guidelines of the mortgage program you’re using.
You will need to provide a gift letter to your lender, signed by you and the donor, stating that the funds are a gift and will not need to be repaid.
It’s also important to have a paper trail. You cannot simply bring cash to your closing, or count cash as the gift. The funds must be clearly documented, whether through a check deposit or bank transfer. Your lender will need to see a record of the money transferring from the donor’s account to yours.
Learn more: How To Write a Gift Letter for a Mortgage (With Free Sample Template)
If you’re buying a home from a parent or another close friend or relative, a gift of equity could take care of your loan’s down payment.
With a gift of equity, the seller accepts less than the fair market value for the home. For example, the home is worth $350,000 but the homeowner agrees to sell it to you for $300,000.
The $50,000 difference gets credited to your down payment, so you don’t need cash to put down. You will need to pay closing costs, but you can use gift funds or closing cost assistance toward those. Some loan programs also allow you to finance the closing costs into the loan.
Learn more: What is a Gift of Equity? For Some, It’s Instant Equity With No Money Down
Can I buy a house with no money? USDA and VA loans offer 100% financing for eligible homebuyers, though you will likely need money for closing costs. You can use gift funds or down payment assistance to cover all or part of your down payment and closing costs on USDA, VA, FHA, and Conventional loans.
Are there programs to help buy a house? Yes. There are homebuyer programs throughout the country that offer down payment and closing cost assistance in the form of grants, forgivable loans, and “silent second” mortgages that only need to be repaid when you sell or refinance the home. There are also homebuyer assistance programs for first responders, EMTs, teachers, and similar professions.
How do you know if you qualify for an FHA loan? To qualify for an FHA loan with 3.5% down, you’ll need a credit score of 580 or higher and you’ll have to meet all other FHA borrower guidelines as well. You can qualify for an FHA loan with a credit score of 500-579 if you can put down 10% or more.
Financial assistance to buy a home can help you realize your dreams of homeownership, save money, and start building wealth for yourself (rather than your landlord). So, why wait? Talk to a lender and get pre-approved**** so you can make this year the year you purchase a new home.
*A down payment is required if the borrower does not have full VA entitlement or when the loan amount exceeds the VA county limits. VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits. **USDA Guaranteed Rural Housing loans subject to USDA-specific requirements and applicable state income and property limits. ***Eligibility subject to program stipulations, qualifying factors, applicable income and debt-to-income (DTI) restrictions, and property limits. ****Pre-approval is based on a preliminary review of credit information provided to Fairway Independent Mortgage Corporation, which has not been reviewed by underwriting. If you have submitted verifying documentation, you have done so voluntarily. Final loan approval is subject to a full underwriting review of support documentation including, but not limited to, applicants’ creditworthiness, assets, income information, and a satisfactory appraisal.Copyright©2024 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. Fairway is not affiliated with any government agencies. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.
