If you’re stretching toward a home purchase, anything that shrinks the pile of cash you need at closing looks pretty appealing.
Homebuying assistance programs — usually in the form of help with your down payment or closing costs — could mean affording to buy now instead of waiting. Jeffrey Ruben, president of WSFS Home Lending in Greater Philadelphia, estimates about 12% of closings at WSFS Bank rely on some type of homebuying assistance.
“Clearly a minority of the borrowing public is taking advantage of this, or has the ability to take advantage of it,” he says.
Eligible buyers receive an average benefit of $18,000, according to Down Payment Resource, which tracks homebuying assistance programs. But qualifications can be strict, and funds can come with strings.
“Locked Out” is a series about why buying a home feels out of reach, and the solutions that could change the game. This time, I’m looking at who offers down payment assistance, when it pays off and what buyers should know before saying yes.
Not all programs are created equal
When researching your options, start close to home. State and local governments offer more than half of all homebuying assistance programs, according to Down Payment Resource. Nonprofits, like the Neighborhood Assistance Program of America and niche regional programs, run another 22%.
First-time buyers with lower income have the most choices for down payment assistance, but repeat buyers and higher earners shouldn’t count themselves out. About one in 10 programs don’t have income limits, reports Down Payment Resource.
Ruben says government-backed programs are typically the best options because they’re designed with a public goal in mind, such as revitalizing a neighborhood or expanding homeownership. Home builders also offer buyer credits or discounts, but there’s usually something in it for them — like directing buyers to their in-house financing.
“If it's coming from the guy who's trying to sell you the house, you know, you have to really kind of be skeptical of that,” Ruben says.
You might have more choices than you think, but look beyond the dollar amount. Consider who’s offering the help and whether the details work for you.
Does the program fit your future plans?
Consider how the assistance itself is structured. It may be a grant, tax credit, forgivable loan or loan you’ll eventually repay. Each one has trade-offs that might not be strictly financial.
“It can turn into, quote-unquote, 'free money,’” Ruben says. “But there's a cost.”
For example, some programs structure assistance as a second mortgage. You may or may not owe monthly payments, but the debt can limit your ability to sell, refinance or rent out the home. A forgivable loan might require you to stay in the home for five or 10 years. Move sooner, and you could owe the remaining balance.
Before accepting help, ask what happens if your plans change. The money may still be worth it, but make sure today’s help won’t box you in tomorrow — especially when today’s mortgage rates are high enough that you might want to refinance later.
Using homebuying assistance might limit your ability to shop around. Government-backed programs can require you to select from a list of participating mortgage lenders. Unsurprisingly, grants given directly through a bank or mortgage company typically require you to get your mortgage there, too.
Some lenders offset the cost of homebuying assistance by charging you a higher interest rate, but the trade-off may be worth it if it helps you buy sooner. To compare total costs, get a Loan Estimate from at least three participating lenders offering assistance — plus a couple “regular” outside offers — to see which mortgage costs less overall.
If lender shopping stresses you out, a mortgage broker can help. Brokers compare rates and fees through a behind-the-scenes network of wholesale lenders — kind of like a travel agent comparing flights on your behalf. I learned an interesting tidbit when talking with a loan officer recently: Some wholesale lenders may offer assistance programs they don’t advertise directly to consumers, but a broker would know where to look.
Choose a lender with a proven track record of navigating down payment assistance. Throughout the homebuying process, your lender will work closely with the program to make sure the funds arrive on time to close.
Finally, ask a tax advisor about any tax implications, too. Depending on the program, you could receive a Form 1099-MISC and need to report the assistance as income.
Can assistance programs fix the affordability crisis?
Homebuying assistance can help buyers clear one hurdle, but it’s a long race. There’s a reason many assistance programs require you to complete a home buyer education course. The costs of homeownership are ongoing, including surprises like home repairs.
“Just throwing money at somebody doesn't solve the ultimate problem of affordability,” says Cheri Salazar, CEO of NestSTEPS, an employer-sponsored homeownership benefits and education platform.
Salazar, who co-founded NestSTEPS in January 2025, is betting on the next wave of homebuying assistance showing up in your employee benefits, alongside health insurance and retirement planning. Employer-backed homebuying programs are still niche, but some companies — usually large employers — see them as a tool for building worker loyalty and retention.
Earlier this year, financial services company BNY announced that eligible employees making $100,000 per year or less could qualify for $6,500 in down payment assistance toward the cost of their first home.
“This is something that the government has been trying and failing to accomplish for decades,” Salazar says. “And we believe that the real solution needs to come through the private sector.”
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