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If you have homebuying on your mind and are considering taking on a mortgage, affording the down payment can be the biggest obstacle—but it doesn’t have to be.

Don’t let the fear of affording the down payment or being rejected for a loan stop you from pursuing homeownership.

Down payment assistance (DPA) programs are available nationwide to eligible buyers to ease the financial burden of buying a home. You may be able to qualify for assistance even if you think you can’t.

Let’s go over five common misconceptions about DPA programs and how to take advantage of this excellent resource.


DPA 101

Down payment assistance programs can come from federal, state, and local sources and in various forms, such as forgivable grants, deferred-payment, and second mortgages.

Each type has its own benefits and limitations.

  • Grants can cover the down payment and closing costs and are treated like a gift in the sense that borrowers do not have to repay them.
  • Deferred-payment second mortgages are combined with your home mortgage to cover the down payment and closing costs. Borrowers wouldn’t have to repay this second mortgage until they sell or refinance their home. These types of mortgages can become forgivable if the borrower meets specific criteria.
  • Second mortgages are also used with your home mortgage to cover the down payment and closing costs, but they require repayment over a set term.

Speak with a qualified lender to review your financial scenario and homeownership goals to determine which type of DPA would meet your needs. They can also give their expertise on your area’s specific criteria and eligibility.


DPA common misconceptions

The most common misconceptions regarding DPA programs tend to push buyers away from purchasing their dream homes out of fear of not qualifying for assistance and not being able to afford the down payment.

We’re going to bust these myths and put a spotlight on the advantages of DPAs.

Myth 1: There are limited options

There are thousands of DPA programs available throughout the country. There are DPA programs based on profession, time of residency or location of the property, income levels, specific mortgages, and approved lenders.

The Good Neighbor Next Door DPA program, for example, is set up for eligible law enforcement, teachers, firefighters, and EMTs and offers a 50% discount on a home’s listing price. So long as you remain in the home for three years and with eligible occupancy status, repayment isn’t required.

You can also receive down payment assistance if you choose an FHA, VA, USDA, or a conforming mortgage from Fannie Mae or Freddie Mac.

These types of mortgages already have many benefits, such as low down payments and lower interest rates, and make purchasing a home even more affordable.

Myth 2: It’s hard to qualify

As we’ve discussed, there are many DPA programs available. Some buyers think there has to be a catch, like a laundry list of qualifications and restrictions, making it nearly impossible to qualify.

This isn’t the case. Determining which DPA program is best for your needs is the hardest part. Every program has different restrictions and criteria that you must meet to qualify for assistance.

Common criteria to be mindful of as you research DPA programs include property location, the price of the home, your income, and your credit score.

Another common requirement is the completion of a short homebuyer education course with a certified counselor.

Myth 3: DPA is only available to first-time homebuyers

There are many DPA programs available to first-time homebuyers. Some borrowers may think they’re automatically disqualified if they’ve bought a home in the past.

The first thing to understand is that many DPA programs use the Department of Housing and Urban Development’s definition of a first-time homebuyer—someone who has not owned a home in at least three years.

Secondly, many DPA programs do not require you to be a first-time homebuyer by any definition. If you’ve owned a home in the past, your lender can help you find the right program for you.

Myth 4: DPAs can complicate financing

Yes, there is additional paperwork to complete when you apply for down payment assistance. Yes, you will need to provide documentation for approval.

However, much of the paperwork and required documentation is what you’ve already provided or will provide for your home mortgage.

So while assistance can add paperwork to the homebuying process, it doesn’t have to complicate it.

Myth 5: It’s better to put more money down

Down payments can be a heavy financial burden, even a deal breaker, for many buyers. Putting more money down on a home upfront can give you access to beneficial mortgage rates and loan terms.

However, that isn’t a realistic option for every buyer and that doesn’t need to deter anyone from pursuing homeownership. Down payment assistance programs benefit eligible homebuyers but especially those with smaller savings.

Down payment assistance programs can help you purchase a home and set you on the right path to meet your financial goals. If you receive assistance, you’re reducing the possibility of taking on more debt than you can leverage.

If the assistance doesn’t have to be repaid, you’ll even save money, which can put you in an advantageous position later.


Take the next steps with The Federal Savings Bank

If you’re interested in down payment assistance, reach out to a qualified lender with experience in working with DPA.

You can also do your own research for local and state programs to understand what you may be eligible for.

Learn more about DPAs and qualifying mortgages from The Federal Savings Bank learning center.

We’re dedicated to providing tools and resources to first-time buyers, current homeowners, and those interested in advancing their financial portfolio or situation.

Learn more about our DPA programs and how we can help you reach your goal of homeownership.


Subject to credit approval. Terms and conditions may apply. Property insurance is required on all loans secured by property. Down payment assistance requirements are based on the mortgage insurer or guarantor’s guidelines. Borrower may fund down payment and closing costs. Down Payment Assistance Program, which assist eligible homebuyers with purchasing a home. Down payment assistance programs are not eligible for all potential homebuyers.

This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.