Despite the pandemic, it’s a great market for selling a home. The median home price in America hit record heights in May 2021. For first time home buyers, this climate can be a little intimidating. 

Thankfully, there are many first-time home buyer down payment assistance programs out there to help. These programs may offer anything from tax credits to grants to low-interest loans. Obviously, grants are the most valuable type of down payment assistance, because they never have to be repaid.

To find out more details behind these first time home buyers payment assistance programs, check out the information below.

What Is First Time Home Buyer Down Payment Assistance?

If you’re lucky, your loan provider will not require a down payment for your home loan. This is usually exclusive to government-backed loans, like USDA loans and VA loans. These loans have strict requirements, and not all home buyers are eligible.

That means most home buyers need a down payment to mitigate risk for the lender. Often, this amount will be between 15% and 25% of the total home cost. Down payments on a home are often thousands of dollars, which many Americans don’t have readily available. 

This is where first time home buyer down payment assistance programs come in. 

Different Kinds of Down Payment Assistance

The types of programs available depend on where you live. There may be private sector programs from local banks, nonprofit programs from charities, state-level government programs, or local-level government programs. Here are some of the things they may offer. 

Individual Development Accounts

This type of down payment assistance is also known as a matched savings program. The home buyer will deposit their savings somewhere, where the entity offering the program then matches those savings. The total can be used toward the down payment.

Low-Interest Loans

Some lenders may offer a second mortgage loan that will cover the down payment, but it needs to be paid immediately. This means the home buyer will be paying on two mortgages. This should only be an option if the second loan has a low interest rate.

Make sure to read more on purchasing a home through this process, as it can be financially difficult to manage both mortgages.

Deferred-Payment Loans

Deferred-payment loans are a pretty good deal, because not only are they at 0% interest, but they don’t have to be repaid immediately. In fact, they don’t need to be repaid until the first loan is paid in full or the homeowner sells.

Forgivable Loans

These loans are also at 0% interest, and they are similar to deferred-payment loans because they don’t need to be paid immediately. The lender has a choice to forgive these loans between 5 and 20 years of the loan age.

Grants

Grants are the best form of down payment assistance, because they never need to be repaid. It’s essentially free money. Some banks and state governments offer these types of grants. 

Deciding on a Program

Before deciding on a first time home buyer down payment assistance program, research what is available to you. Then, read through the strict criteria for each loan. There’s no harm in applying for multiple programs, as an offer is never guaranteed — some can even be bundled. 

For more useful real estate guides like this one, take a moment to check out our articles.