“I wanted something that was mine. A space my kids could feel secure in and grow up in. I didn’t just want a place to stay — I wanted a place to build from.”

That’s Brittany. More than a year ago, she wasn’t sure she was ready to buy a home. She had questions she was afraid to ask. There were setbacks she didn’t expect. But she stayed the course, worked closely with her loan officer, Chelsey Murphy, and the day she got her keys? She stood in the doorway, took a deep breath, and just let it sink in.

Her story isn’t unusual. Most people who buy a home aren’t sure they’re ready. They figure it out as they go — with the right information and the right support.

And it’s worth figuring out. The Federal Reserve found that the median net worth of a homeowner is roughly 40 times that of a renter. Not because homeowners start out richer. Because owning a home builds wealth over time — month by month, year by year — while rent builds someone else’s.

There are four main ways to finance a home with little money down: 

Gift funds from family, down payment assistance programs (DPA), state and local homebuyer programs, and federal low-down-payment loans like FHA, VA, and USDA. These can often be combined to reduce your out-of-pocket cost at closing to near zero. 

The good news? 

There are billions of dollars in assistance programs, grants, and flexible loan options designed specifically to help everyday people do exactly what Brittany did. Most buyers never know these tools exist. This guide walks through all of them — gift funds, down payment assistance, state and local programs, and more — so you can stop renting someone else’s dream and start building your own.

Tool #1: Gift Funds

One of the most underutilized resources in home buying is also the most personal: a financial gift from family.

Most loan programs, including conventional, FHA, VA, and USDA loans, allow gift funds to cover part or all of your down payment and closing costs. If a parent, grandparent, sibling, or other relative wants to help you buy a home, they can contribute cash that they use at closing.

How gift funds work:

• The gift must come from an eligible donor (family members, employers, or nonprofit organizations, depending on the loan type).
• The donor must provide a gift letter, a signed statement confirming the money is a true gift, not a loan that must be repaid.
• Your lender partner will verify the funds that have been transferred into your account (typically 60 days of bank statements are reviewed).

Key rules to know about gift funds:

• The gift cannot be a disguised loan. If repayment is expected, it must be disclosed and counted as a liability.
• FHA loans are the most flexible with gift funds; 100% of your down payment can come from a gift.
• Conventional loans may require you to contribute a minimum amount of your own funds if your down payment is below 20%.

If your family is in a position to help, this is one of the most powerful ways to accelerate your path to homeownership. Have an honest conversation; many relatives are happy to give when they understand exactly how it helps.

Tool #2: Down Payment Assistance Programs (DPA)

Down payment assistance programs are one of the best-kept secrets in real estate. These programs, offered by state housing finance agencies, local governments, and nonprofits, provide grants or low-interest loans specifically to help you cover down payment and closing costs.

Types of down payment assistance:

Grants: Free money that does not need to be repaid. Typically awarded to buyers who meet income and purchase price limits.

Forgivable loans: A second loan that is “forgiven” (canceled) if you stay in the home for a set number of years, often 5 to 10. If you sell or refinance before the forgiveness period ends, you repay the remaining balance.

Deferred payment loans: A second loan with no monthly payments. The balance is repaid when you sell, refinance, or pay off your first mortgage.

Low-interest second mortgages: A loan with a below-market interest rate, repaid monthly alongside your primary mortgage.

How much can you get? Assistance amounts vary widely by location. Some programs offer $5,000–$15,000; others in high-cost markets may provide $25,000, $50,000, or more. Many are specifically targeted at first-time homebuyers, though “first-time” is often defined as not having owned a home in the past three years, meaning previous owners may still qualify.

Where to find DPA programs:

• Your state’s Housing Finance Agency (HFA); every state has one. Search “[your state] housing finance agency” to find it.
• The U.S. Department of Housing and Urban Development (HUD) at hud.gov maintains a directory of local assistance programs.
• Down Payment Resource (downpaymentresource.com) is a free tool that lets you search available programs by location and eligibility.

Tool #3: State and Local Homebuyer Programs

Beyond down payment assistance, many states and cities offer broader homebuyer programs that bundle multiple benefits together: reduced interest rates, closing cost assistance, mortgage credit certificates, and homebuyer education all in one package.

Mortgage Credit Certificates (MCCs): 

An MCC is a federal tax credit, not a deduction; an actual dollar-for-dollar credit that allows eligible first-time buyers to claim a percentage of your mortgage interest paid each year on your  federal tax return. This effectively lowers the cost of homeownership every single year you hold the loan. Issued through state HFAs, MCCs can be worth thousands of dollars annually.

State first-time buyer loan programs: 

Many state HFAs offer their own mortgage products with below-market interest rates, paired with down payment assistance. Examples include:

• NCHFA (North Carolina) provides the NC Home Advantage Mortgage with DPA of up to 3–5% of the loan amount.
• CHFA (Colorado) provides low fixed-rate loans and down payment assistance grants.

Every state has comparable programs. The key is finding them, and that starts with your state HFA or a HUD-approved housing counselor.

Local city and county programs: 

Many municipalities run their own homebuyer assistance programs, especially in communities working to increase homeownership rates or revitalize specific neighborhoods. These are often the most generous programs available, and the least advertised. Call your city or county’s housing department directly to ask what’s available.

Tool #4: Federal Loan Programs with Low Down Payments

Even without additional assistance, several federal loan programs make homeownership accessible with minimal upfront cash:

• FHA loans – 3.5% down with a credit score of 580+. One of the most accessible entry points to homeownership.
• VA loans – Zero down payment for eligible veterans and service members. No PMI. One of the most generous loan products in existence.
• USDA loans – Zero down payment for buyers in eligible rural and suburban areas who meet income limits.
• Conventional loans – Just 3% down for first-time buyers using Fannie Mae or Freddie Mac guidelines.

Stack one of these with a down payment assistance program, and your out-of-pocket costs at closing could be dramatically reduced, sometimes to near zero.

The Step Most Buyers Skip: Homebuyer Education

Nearly every down payment assistance and state loan program requires completion of a HUD-approved homebuyer education course before closing. But even if it weren’t required, it would be worth taking.

These courses, many of which are free or low-cost and available online, teach how to evaluate homes, understand your loan documents, budget for homeownership costs, and avoid predatory lending. 

Buyers who complete homebuyer education are statistically less likely to default on their loans and more likely to feel confident throughout the process.

Find a HUD-approved counseling agency at hud.gov or call 1-800-569-4287.

Putting It All Together: Your Path to the Keys

Here’s what the path to homeownership can look like when you layer these tools together:

1. Take a free homebuyer education course to understand your options and get a certificate of completion many programs require.
2. Check your eligibility for state, county, and city DPA programs using Down Payment Resource or your state HFA’s website.
3. Explore federal loan programs – FHA, VA, USDA, or Conventional 97- to find the lowest down payment option you qualify for.
4. Ask family members if they’re able to contribute gift funds, and have your lender partner prepare a gift letter template.
5. Compare lenders – not all lenders participate in every assistance program. Work with a lender approved through your state HFA for most options.
6. Ask about MCCs – a mortgage credit certificate can lower your tax bill every year your buyer owns the home.

Frequently Asked Questions About Down Payments

Can you use gift funds for the entire down payment? 

Yes, on FHA loans, 100% of the down payment can come from a gift. Conventional loans may require a down payment of at least 20% if your down payment is below 20%.

Do down payment assistance programs have to be repaid? 

It depends on the program. Grants do not need to be repaid. Forgivable loans are canceled after you stay in the home for a set number of years. Deferred loans are repaid when you sell or refinance. Always read the program terms carefully.

What credit score do you need to qualify for homebuyer assistance programs? 

Most programs require a minimum credit score of 620–640, though FHA-based programs may accept scores as low as 580. Some local nonprofit programs work with buyers rebuilding credit.

What is down payment assistance and how do I qualify? 

Down payment assistance (DPA) is money from state agencies, local governments, or nonprofits that helps cover your down payment and closing costs, through grants, forgivable loans, or low-interest second mortgages. Eligibility is usually based on income, purchase price, credit score, and sometimes first-time buyer status. Start with your state Housing Finance Agency or Down Payment Resource.

Is there a first-time homebuyer tax credit? 

A federal Mortgage Credit Certificate (MCC) provides an annual tax credit, not a deduction, on a portion of the mortgage interest you pay. Availability varies by state. Check with your state HFA.

Where should I start? 

Start with a conversation with one of our loan officers. We can assess your financial background and find programs, grants, and assistance to help  achieve what most people think is unattainable – homeownership. 

Find a Gershman Mortgage loan officer to start a conversation today.

At Gershman Mortgage, communities, families, and homes are at the heart of what we do. Built on the core values of honesty, integrity, entrepreneurial spirit, and customer-first service, we’re committed to providing an exceptional homebuying experience. Our goal is simple: to exceed expectations and build lifelong relationships.

NMLS #138063 16253 Swingley Ridge Road Suite 200 Chesterfield, MO 63017 (800) 457-2357 Equal Housing Lender. Serving borrowers in: Alabama, Arkansas, Colorado, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Wisconsin

Written by Kaylee Larson for Gershman Mortgage