First-time home buyer grants for 2023: 8 Grant programs

November 25, 2022 - 8 min read

Are there first-time home buyer grants?

First-time home buyer grants can help with your down payment and often your closing costs, too. Every state offers some form of home buyer assistance — but most borrowers don’t even realize it’s available.

First-time home buyers could be in line for thousands of dollars in grant money if they qualify. However, the amount and type of assistance vary a lot by program. So explore all your options and make sure you’re leveraging the best homeownership grants available to you.

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1. State first-time home buyer grants

Almost every state has its own down payment assistance program administered by a housing finance agency or other government organization. You can find a list of available programs here.

Every program gets to set its own rules. So the amount you can receive, whether or not it needs to be repaid, and eligibility guidelines will vary hugely depending on where you want to buy a home.

Grants and forgivable loans

A number of states (and some county or city governments) offer outright grants that you never have to repay. These could be a couple of thousand dollars or as much as 3%-5% of your home’s purchase price; it depends on where you’re buying.

Some states also provide forgivable loans. These are typically “silent” mortgages, meaning they have no monthly payments and a 0% annual percentage rate. After a number of years (often 5-10), the loan is fully forgiven. But if you move, sell the home, or refinance before that time is up, you’ll have to repay at least a portion of what you received.

Repayable loans

Not all stage governments offer home buyer grants. Many offer repayable down payment loans instead. You borrow a certain amount and repay it in equal installments over time; for example, over 10 years in parallel with your main mortgage.

The interest rate on these loans is typically very low. And your lender will ensure you can comfortably afford the second mortgage on top of your main mortgage and other debts.

2. National Homebuyers Fund

The National Homebuyers Fund (NHF) is a nationwide home buyer assistance program. It provides grants or three-year forgivable loans to first-time buyers and others purchasing a house. You can usually receive up to 5% of your loan amount, and the assistance can be paired with a conventional, FHA, VA, or USDA mortgage.

The fund is meant to help low- and moderate-income home buyers; that means there are income limits to qualify. But the NHF may have a higher income threshold than the caps set by many state, city, and county programs.

Other eligibility criteria for the National Homebuyers Fund include:

  • A credit score of 640 or higher
  • A debt-to-income ratio of 45% or lower
  • You must use an NHF-recognized lender

You can call (866) 643-4968 to learn more and find a participating lender, or start with the NHF’s website.

3. Chenoa Fund

The Chenoa Fund is a nationwide program offering down payment assistance to first-time buyers. This takes the form of a three-year, silent, forgivable loan rather than an outright grant. Chenoa Fund also offers installment loans, which need to be repaid in parallel with your primary mortgage.

The Chenoa Fund’s forgivable loan can be up to 3.5% of your home’s purchase price. That would cover the entire down payment requirement for an FHA loan or a 3%-down conforming mortgage.

Here are the main eligibility criteria for the forgivable loan (called “Chenoa Fund DPA Edge”):

  • Credit score of 620 or higher
  • Income at or below 115% of the area median income (AMI). Look up your AMI here
  • Debt-to-income ratio of 45% or lower
  • You must use a Chenoa Fund-approved lender

If you can’t get a forgivable loan, you might still find that Chenoa Fund’s repayable loan offers a better deal than your state’s program. But explore all your options. You can call (866) 563-3507 or visit the Chenoa Fund website to learn more.

4. Fannie Mae Community Seconds

Fannie Mae’s Community Seconds isn’t a grant or forgivable loan. But it’s a very generous mortgage program that can cover your entire purchase cost: the home, your down payment, your closing costs, and even some home improvements. Altogether, Community Seconds lets you finance up to 105% of the home price using a single, low-rate mortgage.

Repayment terms are flexible; you might make regular monthly payments, take payment holidays, or even pay the whole lot back as a lump sum when you sell the home or refinance your mortgage.

You’ll need to get a Fannie Mae HomeReady loan to be eligible. And you typically must have:

  • An income at or below 120% of your area’s median income
  • A credit score of 640 or higher

However, you may be able to get a Community Seconds loan through a local program that has different, sometimes easier, eligibility criteria. Ask your mortgage lender for details.

5. Freddie Mac Affordable Seconds

Freddie Mac’s Affordable Seconds program is a lot like Fannie Mae’s Community Seconds. It lets you borrow up to 105% of the sales price, in total, to cover your home purchase, down payment, and closing costs.

Typically, Affordable Seconds must be paired with a Home Possible mortgage loan. These allow just 3% down but have a slightly higher minimum credit score requirement of 660.

Community Seconds and Affordable seconds are very similar programs — as are the HomeReady and Home Possible mortgages with which they’re paired. So have your lender explain both options and compare terms to see which one works best for you.

6. Good Neighbor Next Door Program

The US Department of Housing and Urban Development (HUD) runs the Good Neighbor Next Door program. HUD’s website explains the concept:

“Law enforcement officers, teachers (pre-Kindergarten through 12th grade) firefighters, and emergency medical technicians can contribute to community revitalization while becoming homeowners through HUD’s Good Neighbor Next Door Sales Program. HUD offers a substantial incentive in the form of a discount of 50% from the list price of the home. In return, an eligible buyer must commit to live in the property for 36 months as his/her principal residence.”

The main drawback to this is that you must buy a HUD home for the 50% discount to apply; these are foreclosed homes previously financed by FHA loans. And they must be located in designated “revitalization areas," which tend to be struggling neighborhoods.

Still, if you’re in an eligible profession and your area qualifies for the Good Neighbor Next Door program, that 50% discount should be irresistible.

7. Grants for disabled home buyers

Home buyers with a disability — or caretakers buying a home with or for their disabled relative — may be eligible for special assistance programs.

  • VA loans for disabled buyers: If you have a service-related disability, you shouldn’t have to pay the VA funding fee at closing. And minimum service requirements don’t apply. You might also be exempt from property taxes and could receive a tax credit, depending on where you live. The VA also offers special grant programs to adapt your housing to your needs. Learn more about VA loan grants here
  • HUD Housing Choice vouchers: Talk to a HUD-approved housing counselor about your possible eligibility for Section 8 vouchers. But note that these aren’t available everywhere and it can take a while to get one. If and when you have a voucher, you should pay roughly 30% of your adjusted monthly income for your housing
  • Nonprofit home buyer assistance: Nonprofits may also provide help for disabled home buyers. For starters, check out the National Disability Institute, Habitat for Humanity, Rebuilding Together AmeriCorps, and Homes for Our Troops

You should also be aware that disability income may help you get a home loan. Properly documented income from government disability programs and your state’s Medicaid program will typically count when you apply for a mortgage. In other words, you can include those sources when you declare your total income to a lender.

8. Grants from private lenders

Several private-sector lenders offer first-time home buyer grants, some of which may offer additional perks like reduced private mortgage insurance (PMI). These are generally geared toward lower-income or otherwise disadvantaged home buyers. To give a few examples, these include:

  1. TD Bank Home Access Grant ($5,000)
  2. Chase Bank DreaMaker Grant (up to $5,000)
  3. Bank of America Community Affordable Loan Solution (no down payment or closing costs)
  4. Navy Federal Credit Union Homebuyers Choice Loan (0% down for eligible members)

Naturally, terms and conditions will apply to those offers. And you need to make sure you’re getting a great overall mortgage deal once the grant is in place. But those are well worth exploring

Is there a $25,000 first-time home buyer grant?

Many home buyers are wondering about the Downpayment Toward Equity Act of 2021. According to the National Council of State Housing Agencies, this is an initiative to “establish a grant program to provide down payment and other home purchase assistance to underserved home buyers.” If passed, it could offer up to $25,000 in assistance to eligible borrowers.

But this remains a bill and is still working its way through Congress. So it’s not law yet. And, following the 2022 midterms, it may never be enacted. Check back for more details over time.

Who qualifies for a first-time home buyer grant?

Requirements for a first-time home buyer grant usually mirror home loan requirements. You can typically expect to need:

  • A minimum credit score (often 620)
  • A debt-to-income ratio below 43%-45%
  • A two-year employment history
  • Steady, reliable income
  • A clean credit history

Although first-time home buyer grants are meant to help with your down payment, you likely still need some cash saved up.

Programs may require a “minimum borrower contribution,” meaning you have to contribute at least $1,000 or a percentage of the home price out of pocket. Home buyers also need to pay closing costs — and the grants available typically aren’t large enough to cover both the down payment and upfront fees in full.

In addition, first-time home buyer grants usually impose income limits and purchase price limits. Household income limits are often capped at around 80%-120% of the area median income (AMI). You can use this lookup tool from Fannie Mae to find your county’s median.

Purchase price limits tend to vary by ZIP code and will be published by the agency offering your assistance program.

Finally, many first-time home buyer grants require you to take a homebuyer education course. These are often offered online and may be free, though some cost around $100.

Where do I apply for a first-time home buyer grant?

It’s probably best to start with your state, city, or county’s housing finance agency. But you can also talk to your Realtor or mortgage lender. An experienced mortgage professional should be able to recommend local assistance programs for which you may be eligible. Ready to get started?