How to Qualify for Mortgage Down Payment Assistance

May 27, 2021
Down payment assistance qualifications include first-time homebuyer status, income limits, and homebuyer education requirements.

It might not be as hard as you may initially think to qualify for down payment assistance (DPA) grant programs.

Generally speaking, the criteria come down to three basic areas:

  • Restricted to first-time homebuyers
  • Buyers must meet income levels
  • Homebuyer education course required

Of course, there may be other criteria, so it is always helpful to speak with a knowledgeable lending professional to get a complete picture of all applicable qualifying criteria.

What is Mortgage Down Payment Assistance?

Down payment assistance programs are available through state Housing Finance Authorities (HFAs) with the goal of making homeownership more accessible.

These programs vary from state to state, but they typically offer assistance in the form of a grant, forgivable loan, or low-interest loan. Some provide a flat-rate amount of assistance while others offer a percentage of the total purchase price (usually 3-5% up to a certain dollar amount).

Requirements for Down Payment Assistance

If you meet any of the following requirements, you may qualify for down payment assistance.

First-Time Homebuyers

More often than not, down payment assistance is reserved for first-time homebuyers. It’s put into place to help individuals get started and achieve their homeownership goals.

The definition of “first-time homebuyer” seems pretty self-explanatory, but it covers more individuals than you might think. When it comes to qualifying for down payment assistance, a first-time homebuyer is someone who has either never owned a home or who has not owned in at least the past 3 years.

We all know that life throws us curve balls sometimes. So, it is possible that someone could have been a homeowner and then maybe experienced a divorce or another life event and did not retain an ownership interest in the property. Typically, multiple years of tax returns will be requested or an executed affidavit certifying no recent ownership will be requested from the borrower.

Income Limits

Down payment assistance programs have certain household income limits in place to ensure the assistance is available to those that truly need help achieving the dream of homeownership.

When exploring local down payment assistance options, you might see terms like “moderate-income” or “low-income” thrown around – but keep in mind this is all dependent on your location and the area’s average income level.  

Annually, the Department of Housing and Urban Development (HUD) publishes income limits that are used in determining program eligibility. These limits vary state by state and even go down to the county level – typically 50-80% of the median income for the county or metropolitan area in which you choose to live.

Because income limits vary by location, a homebuyer may be eligible in one location but not at another. This helps to make the limits fair based on the region.

Homebuyer Education

A major concern with homeownership initiatives is not just equipping consumers to buy a home, but also they retain that home and experience the full benefits of homeownership. When it comes to both, knowledge is power. That said, a homebuyer education course is almost always required to secure down payment assistance.

After going through one of these courses, homebuyers will learn how much home they can reasonably afford, how to select a real estate agent or mortgage lender, how to handle unexpected repairs to the new home, and more.

These courses are available from accredited providers at no cost to the homebuyer in many cases. They can be taken online or in person.

As a company, Waterstone Mortgage is an approved lender with many state and local Housing Finance Agencies. Speak with one of our dedicated mortgage loan professionals, who would be happy to discuss available options with you. We pride ourselves on simplifying the home loan process, so our customers have a clear path to their dream of homeownership.