Guide To First-Time Homebuyer Grants

fizkes/Getty Images: Illustration by Issiah Davis/Bankrate

Coming up with a down payment on a home — especially if it’s your first — can feel impossible. The good news is that there are many first-time homebuyer grants available that can help you bridge any gaps in your savings. These programs are offered by banks and non-profit organizations, as well as state and local governments.

What is a first-time homebuyer grant?

The defining characteristic of a first-time homebuyer grant is that you don’t have to pay the money back. The funds can help you cover a down payment on a home, as well as closing costs.

First-time homebuyer grants differ from other types of down payment assistance that require you to repay the funds or meet certain requirements to have the funds forgiven. They also differ from affordable mortgage programs that come with perks like a lower mortgage rate or lower mortgage insurance premiums.

How to qualify for a first-time homebuyer grant

First-time homeowner grants tend to be geared toward low- to moderate-income borrowers. That exact definition depends on your income, location and household size, but generally speaking, households that earn 80 percent or less of the area median income (AMI) qualify as “low-income,” and households that earn more than 80 percent and up to 100 percent of the AMI qualify as “moderate income.” You can find your AMI here.

Beyond income limits, most grant programs share a few common requirements, including:

• Home price limits: Again, these limits vary widely based on your state or local housing market.
• Borrower contribution: The buyer must typically chip in some cash — often either 1 percent of the purchase price or $1,000, whichever is greater.
• Residency status: Most grant programs require the home you’re buying to be your primary residence, not a rental or a second home.
• Homebuyer education: Many grant programs require you to complete a homebuyer education course before receiving the funds.

8 first-time homebuyer grants to consider

1. National Homebuyers Fund

The nonprofit National Homebuyers Fund sponsors down payment and closing cost grants that can total up to 5 percent of your home’s purchase price. You don’t actually have to be a first-time homebuyer to qualify, but you do need to find a mortgage lender that participates in the program and forgives the funding. You can call the organization for help finding local lenders at 866-643-4968.

2. Bank of America grant programs

Bank of America offers two grant options to help with a down payment and closing costs: the America’s Home Grant and Down Payment Grant programs. The America’s Home Grant provides up to $7,500 in lender credits for closing costs, while the Down Payment Grant provides up to $10,000 in down payment help. You’ll have to get your mortgage from Bank of America, however, and the Down Payment Grant could be counted as taxable income.

3. Chase Homebuyer Grant

The Chase Homebuyer Grant is available to homebuyers in select areas of the U.S. The program provides grants of up to $5,000 that apply first toward buying down your interest rate, then toward lender fees, and then toward down payment costs. The Homebuyer Grant is available to applicants who are seeking the bank’s DreaMaker loan, or a conventional, FHA or VA mortgage.

4. Wells Fargo grant programs

Wells Fargo offers two types of assistance grants: down payment help through the Homebuyer Access grant and the Dream. Plan. Home. credit for closing costs. The former provides up to $10,000 to eligible borrowers in certain metro areas. The closing cost credit provides up to $5,000 to lower-income borrowers in specific areas. As with other grants offered by banks and lenders, you’ll need to get your mortgage from Wells Fargo to qualify. You can check your eligibility on the Wells Fargo website.

5. HomeReady and Home Possible credits

If you plan to get a HomeReady or Home Possible conventional loan between now and Feb. 28, 2026, you might also qualify for a $2,500 credit if you have “very low income,” meaning 50 percent or less than the median income for your area. At least one person on the home loan must be also a first-time homebuyer. You can apply the credit to your down payment or closing costs.

6. State and local first-time homebuyer grants

Many states and cities offer grant programs for first-time homebuyers. Check with your state’s housing finance authority or real estate agent for more.

A local mortgage lender might also be able to point you toward free money. Here are some examples:

• First-time homebuyer programs by state
  

7. Good Neighbor Next Door program

Available to law enforcement officers, teachers, firefighters and emergency medical technicians, the Good Neighbor Next Door program is overseen by the U.S. Department of Housing and Urban Development and offers a 50 percent discount on homes in designated revitalization areas. As long as you live there for three years, you get the property for half off the list price with no need to pay that discount back.

8. HomePath Ready Buyer program

The HomePath Ready Buyer program comes courtesy of Fannie Mae. With this program, you can get up to 3 percent of your home’s purchase price to help with closing costs. However, you must buy a HomePath property, a home owned by Fannie Mae. These are most often foreclosures that might need significant work.

How to apply for a first-time homebuyer grant

1. Research. Look at which grants you might qualify for from local and state governments, as well as non-profits and lenders.
2. Improve your credit score. Many first-time homebuying grants require a minimum credit score. You can improve your score by making on-time payments and paying down debt.
3. Collect documentation. To apply, you must typically provide extensive documentation of your income and assets, including at least two months of recent pay stubs, in addition to employment verification.
4. Look up guidelines. Grant qualifications vary.
5. Apply. Follow the organization’s application instructions to apply for the grant.

Other assistance for first-time homebuyers

If you can’t find grants for first-time homebuyers that work for you, you aren’t out of luck just yet. There are other low-cost first-time homebuyer loans and programs. You might also qualify for a forgivable loan, which could end up functioning much like a grant. That is, if you meet certain requirements, you never have to repay the loan.

Here are a few options to explore:

• DPA second mortgages: Down payment assistance (DPA) second mortgages are available through many state housing finance agencies. In a DPA second mortgage program, you’ll apply for a 30-year mortgage to finance the home and then another, smaller mortgage to help with the down payment or closing costs. Just like the first mortgage, this second loan comes with an interest rate — although it might be lower than the first — and you repay the balance over time.
• DPA deferred-payment loans: Instead of requiring you to immediately start paying back the down payment assistance funds, some programs allow you to defer these payments until you sell your home, refinance or pay off your mortgage. The assistance won’t accrue interest in the meantime, so the amount you owe won’t grow.
• DPA forgivable loans: Forgivable loans are the closest cousin to homebuying grants because they can wind up being free — but only if you live in the home long enough. For example, you might be able to borrow $5,000 toward a down payment, and the loan balance is reduced every month over 10 years. If you stay in the home for 10 years, it’ll be completely forgiven. If you move within the 10 years, you’ll need to pay back a portion of the loan.
• Individual Development Accounts (IDAs): IDAs are matched savings accounts typically designed for low-income individuals. IDAs are offered through some public housing organizations and private nonprofits and usually provide a dollar-for-dollar match, up to a specific amount, for savings goals, such as a down payment and closing costs.

FAQ

• Which loan is best for first-time homebuyers?
  

  The best first-time homebuyer loan for you depends on your personal situation and what you can qualify for. For example, if you have a credit score lower than the minimum 620 needed for a conventional loan, you might explore an FHA loan.

• Who qualifies as a first-time homebuyer?
  

  Most first-time homebuyer grants, mortgages and other assistance programs define a first-time homebuyer as someone who has never owned a home before or who has not owned a home in the past three years.

• Can I combine multiple grants and assistance programs?
  

  Whether you can combine grants and assistance programs depends on the program. For instance, many state and local government grants are meant to work together. However, other programs specify that only one type of assistance is allowed. You’ll need to contact the agency or company that runs the grant program for details.

• Are there grants available for first-time home buyers with disabilities?
  

  Yes, there are several homeownership grants available for those with disabilities offered at the state and local level. Several programs also specialize in helping disabled homeowners and homebuyers adapt homes to meet their needs. If you’re a disabled veteran, you may qualify for more grants and assistance, such as the Specially Adapted Housing (SAH) grant.