Grants, Forgivable Loans and Assistance: What First-Time Homebuyers in the US Often Don’t Know About
Many buyers don’t realize how many forms of financial assistance exist beyond traditional mortgages. From forgivable loans and grant programs to closing-cost support, this guide reveals overlooked incentives that can save thousands. Learn eligibility basics, income rules, timing tips, and how to stack multiple programs for maximum benefit.
Many new buyers are surprised to learn that public agencies, nonprofits, and lenders offer programs designed to reduce the cash needed to close. These options can cover part of your down payment, offset closing costs, or even forgive assistance over time if you remain in the home. While availability and rules vary by state and city, knowing what exists helps you plan strategically and compare options in your area.
Homebuyer grants: what are they?
Homebuyer grants are funds that do not require repayment if you meet program conditions. They typically come from state housing finance agencies (HFAs), city or county programs, community organizations, and some mortgage lenders. Grants often target first-time buyers, defined in many programs as anyone who has not owned a home in the past three years. Amounts vary widely—commonly from a few thousand dollars up to five figures—and may require you to use a participating lender, take a homebuyer education course, and occupy the property as your primary residence. Because grants are limited, they can be competitive or offered only in specific locations or property types.
How do forgivable loan programs work?
Forgivable loan programs usually take the form of a “silent” or “deferred” second mortgage recorded against the property. They often carry 0% interest and no monthly payment. Instead, the assistance is forgiven after a set occupancy period—commonly 3, 5, or 10 years—provided you meet requirements such as living in the home and not refinancing with a non-participating loan. If you sell, refinance, or move out before the forgiveness period ends, you may need to repay some or all of the assistance. Read the fine print: some programs are deferred but not forgivable, meaning you repay when you sell or refinance. Others forgive in equal annual increments, which can reduce what you’d owe if you move earlier than planned.
First-time buyer tips
- Start with your state HFA and local housing department to see programs available in your area.
- Ask lenders specifically about down payment assistance (DPA) and which programs they’re approved to offer; not all lenders participate in every program.
- Compare how assistance interacts with loan types. Conventional 3% down options, FHA (minimum 3.5% down), USDA (0% down in eligible rural areas), and VA loans (0% down for eligible service members and veterans) can pair differently with grants.
- Budget for closing costs—often 2%–5% of the loan amount—even when you receive help. Some programs cap how funds can be used.
- Take the required homebuyer education early. It clarifies budgeting, insurance, and maintenance responsibilities and is often mandatory for approval.
- Plan for occupancy timelines to avoid accidentally triggering repayment on a forgivable second mortgage.
Closing cost assistance explained
Closing cost assistance helps pay fees due at settlement, such as lender fees, title insurance, recording, and prepaid taxes and insurance. Some banks offer internal grants or credits in designated communities, while public programs may allow you to apply assistance toward approved closing items. Typical amounts range from a few thousand dollars to a percentage of the loan amount, and programs may require minimum borrower contributions. If you receive a lender credit, compare the interest rate you’re offered with and without the credit, because some credits are paired with slightly higher rates. Confirm whether assistance can be layered with seller concessions, which can further reduce your cash to close when permitted by loan guidelines.
US housing incentives to explore
Beyond grants and forgivable loan programs, consider broader US housing incentives. Conventional programs like Fannie Mae HomeReady and Freddie Mac Home Possible allow 3% down with income and property-location criteria and can pair with many DPA options. FHA loans allow 3.5% down and often accept a wider range of credit profiles, making them compatible with numerous state and local programs. USDA loans offer 0% down in eligible rural areas, and VA loans provide 0% down for qualified veterans, service members, and some surviving spouses. Some states offer Mortgage Credit Certificates (MCCs), which can provide a federal tax credit on a portion of mortgage interest, subject to income and purchase price limits. City-level property tax abatements may also reduce ownership costs during the early years in certain markets.
A practical cost lens: most buyers face two main cash items—down payment and closing costs. Conventional loans typically require 3%–5% down for first-time buyers; FHA requires 3.5% down. Closing costs often run 2%–5% of the loan amount. Many assistance programs cover between $5,000 and $25,000, or a set percentage of your price or loan. Forgivable seconds can ease the down payment burden but may restrict early refinancing or moving. Always confirm income limits, purchase price caps, minimum borrower contribution, and whether assistance is a true grant, a forgivable second, or a deferred loan due upon sale or refinance.
Below are real-world examples of assistance and incentives. Availability, amounts, and eligibility vary by location and lender.
| Product/Service | Provider | Cost Estimation |
|---|---|---|
| Down Payment Grant | Bank of America | Up to $10,000 for down payment in select markets |
| America’s Home Grant (closing costs) | Bank of America | Up to $7,500 toward nonrecurring closing costs in select markets |
| Homebuyer Grant | Chase | $2,500–$7,500 grant in eligible communities |
| Down Payment Assistance (grants/seconds) | Texas State Affordable Housing Corporation (TSAHC) | 3%–5% of loan amount as grant or deferred second, program-dependent |
| Down Payment Assistance Loan (DPAL) | SONYMA (New York) | Up to 3% of purchase price, max $15,000; often forgivable over time |
| MyHome Assistance Program (deferred second) | CalHFA (California) | Up to 3% of purchase price (up to 3.5% with FHA); payment deferred until sale/refi |
| Good Neighbor Next Door | HUD | 50% discount on select HUD homes; conditions and occupancy rules apply |
Prices, rates, or cost estimates mentioned in this article are based on the latest available information but may change over time. Independent research is advised before making financial decisions.
In practice, the strongest results come from stacking options that work together—such as a 3% down conventional loan combined with a state HFA grant and a lender-based closing cost credit—while staying within program rules. Run full loan estimates with and without assistance to see the trade-offs, including any added fees, lien conditions, or longer occupancy requirements. Document timelines early, complete education courses, and keep copies of approvals so you’re prepared for underwriting.
Conclusion Understanding the landscape of homebuyer grants, forgivable loan programs, closing cost assistance, and broader US housing incentives can materially change what you need to save and when. With careful review of eligibility and terms, many first-time buyers can lower upfront cash needs, maintain flexibility for the future, and choose financing that supports long-term homeownership stability.
