Guide to first-time homebuyer grants
Key takeaways
- A true first-time homebuyer grant never has to be repaid, but a lot of assistance marketed as a “grant” is actually a forgivable loan or a lender credit with conditions attached.
- Nearly every lender grant requires you to get your mortgage from that lender, which means you can’t shop the rate underneath it.
- Bankrate’s Hidden Homeownership Tax research found that 90% of people who bought a home in 2025 paid more than the most competitive rate available to them, at a cost of $3,656 in the first year alone. The best way to avoid overpaying is to shop with multiple lenders.
- Bank grants are often taxable and can affect your eligibility for income-based programs like student loan payment relief.
A first-time homebuyer grant is money toward your down payment or closing costs that you don’t pay back. Programs commonly offer between $2,500 and $30,000, and the money comes from banks, nonprofits, state and local governments and regional housing funds you reach through a local lender.
But much of the money marketed as a grant isn’t truly a grant. Sometimes, it’s a forgivable loan that becomes debt if you move too soon. Other times, it’s a lender credit that only exists if you take a specific mortgage from a specific company. These programs can still be a good deal, but only if you understand the terms and consider the full financial picture.
This guide covers what’s available, what each program requires and the question almost nobody asks before taking the money: what does the loan attached to it cost?
What is a first-time homebuyer grant?
A grant covers part of your down payment or closing costs, and you never repay it. If you sell the house six months later, the money is still yours.
That makes grants different from most down payment assistance, which usually comes as a loan you repay or a loan that’s forgiven only if you meet conditions. It also differs from affordable mortgage programs like HomeReady or FHA loans, which lower costs through a better rate or cheaper mortgage insurance rather than giving you cash.
Who counts as a first-time homebuyer?
Most programs define a first-time homebuyer as someone who has never owned a home or hasn’t owned one in the past three years. If you last owned a home in 2019 and have rented since, for example, you’re a first-time buyer again under most program rules. Eligibility is worth checking because a few of the biggest programs on this page have no first-time buyer requirement at all.
Grant, forgivable loan or lender credit: Know what you’re getting
Three different products get called “grants,” and they carry three very different risks. The most important risk to understand is what happens if you move early, because that’s where a forgivable loan stops behaving like a gift.
| Type | Do you repay it? | Strings attached | What happens if you move early |
|---|---|---|---|
| True grant | No, never | Income limits, sometimes a geographical or occupation requirement | Nothing owed |
| Lender grant | No, but it’s conditional on the loan | You must get your mortgage from that lender. Often restricted to one loan type and one set of ZIP codes | Nothing owed, but you’re locked into one lender’s rate for as long as you hold the loan |
| Lender credit | No | Applied at closing to points, fees or down payment | Nothing owed |
| Forgivable loan | Only if you break the terms | A secondary lien on the house, released after a set number of years of occupancy | You repay some or all of it, usually prorated by how long you stayed |
| Deferred or repayable second mortgage | Yes | A second mortgage, sometimes at 0% interest, due when you sell, refinance or pay off the first | The balance comes out of your sale proceeds |
Two things to know before you accept a grant or other assistance:
- Lender grants are often taxable. Grant funds may count as income and may be reported to you on a Form 1099, which can impact your tax situation. Budget for the tax bill in the year you close.
- It can come with unexpected trade-offs. Grant funds may affect your eligibility for other forms of income-based assistance, like student loan relief. For example, if you’re on an income-driven student loan repayment plan, a $10,000 grant can raise your payment because it’s reported as income.
How to qualify for a first-time homebuyer grant
Most grants are built for low- and moderate-income buyers. Households earning 80% or less of their area median income (AMI) qualify as low-income, while those earning between 80% and 100% of AMI qualify as moderate-income. Use Fannie Mae’s AMI lookup tool to find yours.
Beyond income limits, most grant programs share a few common requirements, including:
- Location: Many grant programs restrict eligibility to specific census tracts, usually in low- to moderate-income areas. You can be well under the income limit and still not qualify because of your future home’s address.
- Home price limits: These limits vary by state or local housing market.
- Borrower contribution: Some programs require a minimum contribution of your own, commonly around $1,000. Ask before you plan around a grant covering everything.
- Residency status: Most grant programs require the home you’re buying to be your primary residence, not a rental or a second home.
- Homebuyer education: Many grant programs require you to complete a homebuyer education course before receiving the funds.
First-time homebuyer grants to consider
Grants fall into four main categories: lender-funded, nonprofit, government and state-level programs.
Lender grants are often the largest and fastest path to cash, but they require you to borrow from that specific lender, which may not offer the lowest rate. Nonprofit and government programs aren’t lender-specific, but often have income or residency restrictions. State and local programs take the most digging.
Lender-funded grants
These are the largest and easiest to find, and they share one condition: you have to get your mortgage from the lender providing the funds. That means the grant should be only part of your consideration. A few thousand dollars in grant funds upfront can cost you more than that in interest if the rate is higher than what you’d get elsewhere, so take a grant only once you know the loan itself is priced competitively.
Many lenders offer their own in-house grant programs, but here are a few options from big-name banks:
| Program | Amount | Covers | Limitations |
|---|---|---|---|
| Bank of America America’s Home Grant | $7,500 | Closing costs | Can’t be applied to the down payment |
| Bank of America Down Payment Grant | 3% of the price, up to $10,000 | Down payment | May be taxable |
| Chase Homebuyer Grant | $2,500 or $5,000 | Points, then fees, then down payment | Eligible census tracts only |
| Citi Lender Paid Assistance | $7,500 | Closing costs, then a rate buydown | Can’t be applied to the down payment, counseling required |
| Wells Fargo Homebuyer Access | $10,000 | Down payment | Fixed-rate conventional loans only, income restrictions |
| Wells Fargo Dream. Plan. Home. credit | Up to $5,000 | Closing costs | Stacks with Homebuyer Access program, income limits may apply |
If you expect to sell or refinance within about five years, the grant is probably worthwhile — you won’t keep the rate long enough for a higher one to cost you more than the cash is worth. If you expect to keep the mortgage for a decade or more, the rate matters more than the grant does. A higher rate costs you more every month for as long as you owe the money, while the grant only pays you once.
Either way, get rate quotes from two additional lenders before you accept an offer so you know what the grant costs you. Compare all three offers on total cost, including the grant funds, to find the best deal.
Current mortgage rates
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Learn moreNonprofit and loan-linked programs
This money is tied to a type of loan, not to a particular bank. Many lenders offer these loans, so you can compare rates first and still get the money from whichever one you choose.
If you earn 80% or less of your area’s median income, ask about a HomeReady or Home Possible loan. Both go as low as 3% down and are designed to work alongside assistance money. If you add a down payment assistance loan from a state or city program, you can borrow up to 105% of the home’s value, with the extra 5% covering closing costs. Grant money can cover your entire down payment, so you don’t need to use any of your own cash. One exception: If the grant comes from a lender, you still have to put in 3%.
The nonprofit National Homebuyers Fund assists with up to 5% of your mortgage loan amount and doesn’t require you to be a first-time buyer. Some of its programs forgive the money, while others require repayment, so get the terms in writing. HomePath pairs foreclosures owned by Fannie Mae with closing-cost help when you use a loan from your state housing finance agency.
Government programs
Government programs come with different strings than bank grants — these programs consider your job, your military service or how long you’ll stay put, not which lender you use.
Good Neighbor Next Door offers 50% off the list price of homes in neighborhoods HUD has targeted for revitalization and is open to full-time teachers, police officers, firefighters and EMTs. It isn’t a grant — instead, HUD places a no-interest second mortgage against the property for the discount amount and cancels it after you’ve lived in the home for three years. Moving early means you have to pay part of it back.
Veterans with a qualifying service-connected disability can get true grants, with no secondary lien and no repayment requirement. The VA’s Special Home Adaptation grant offers up to $25,350 for fiscal year 2026, and its larger Specially Adapted Housing grant up to $126,526, both usable up to six times in a lifetime. Eligibility runs on your disability rating, not your income or whether you’ve owned before.
State and local first-time homebuyer grants
Nearly every state housing finance agency runs down payment assistance, and a state program is often the better deal than a bank grant for one reason: it usually doesn’t lock you into a single lender’s mortgage, so you can still shop for the best rate.
Is the free money worth the loan it’s attached to?
Many of the grants on this page require you to borrow from a specific lender. The grant and the loan come as a package deal, so selecting a lower rate from another lender means giving up the grant money.
When deciding whether the grant is worth it, start by considering how long you’ll keep the loan. A grant is a fixed amount that arrives once, while the mortgage rate affects your payment every month until you sell or refinance. So the longer you expect to stay put, the less the cash matters and the more the rate does. Grants genuinely favor buyers who expect to move or refinance within a few years.
It’s worth doing the math because this is probably the largest loan you’ll ever borrow, and you’ll be asked to decide at the worst possible moment. By then, there are documents to dig up, an appraisal to schedule and terms you’ve never heard before. You’ve also fallen for the house and you don’t want to lose it. In that stretch, a few thousand dollars in hand feels decisive, while a fraction of a percentage point on the rate feels like nothing. But if you plan to stay put, that rate really does matter.
Bankrate’s Hidden Homeownership Tax research analyzed 3.2 million mortgages originated in 2025. Among people buying a home, 90% paid more than the most competitive rate available to them. For the typical purchase borrower, that overpayment came to $3,656 in the first year and $78,186 over the life of the loan. Why do so many borrowers overpay? Because they accept the first loan offer they receive and don’t compare lenders.
What the trade-off costs
Say you’re buying a $320,000 home and plan to put $20,000 down, so you’re borrowing $300,000 on a 30-year fixed-rate mortgage.
Lender A offers a $10,000 down payment grant and a 7.5% mortgage rate. Lender B doesn’t offer any down payment assistance or grants, but its rate is half a percentage point lower at 7%.
| Lender A | Lender B | |
|---|---|---|
| Grant | $10,000 toward the down payment | None |
| Rate | 7.5% | 7% |
| Down payment | $20,000, half from the grant | $20,000, all yours |
| Closing costs | $9,000 | $9,000 |
| Cash you bring to closing | $19,000 | $29,000 |
| Monthly payment | $2,098 | $1,996 |
| Total interest over 30 years | $455,152 | $418,527 |
Yes, the grant means that you can bring less cash to the closing table, and that’s appealing. For plenty of first-time buyers, that $10,000 decides whether they buy now or in a year or two.
The rate, though, costs you more every month for the next 30 years. Lender A has a higher payment and about $36,600 more in interest over the loan term. So you start $10,000 ahead and give back about $102 of it every month, putting the break-even point around eight years. Before that, the grant was worth taking. Afterward, the grant cost more than it was worth, and if you keep the loan for the full 30 years, you wind up more than $26,000 in the hole.
Before accepting a grant, get a rate quote from two lenders who offer nothing, then ask the grant lender to match it. If they match it, you’ve got the grant and the rate. If they won’t, you’ve learned what the grant actually costs.
How to apply for a first-time homebuyer grant
The application process for first-time homebuyer grants varies depending on the funding organization, but in general, the following steps will apply to most, if not all, of them:
- Determine your eligibility. Use Fannie Mae’s tool to compare your household income with the area median income. Keep track of the home’s address so you can check it against any census tract requirements.
- Compare mortgage rates from at least three lenders. Do this before you pick a grant. Get a Loan Estimate from each so you can compare the rates and fees side by side.
- Research grants and assistance programs. Search for grants you might qualify for from local and state governments, as well as nonprofits and lenders.
- Collect documentation. To apply, you typically need extensive documentation of your income and assets, including at least two months of recent pay stubs, plus employment verification.
- Apply. Follow the organization’s application instructions to apply for the grant.
Other assistance for first-time homebuyers
If you can’t find grants for first-time homebuyers that work for you, you aren’t out of luck just yet. There are other low-cost first-time homebuyer loans and programs. You might also qualify for a forgivable loan that can function much like a grant. That is, if you meet certain requirements, you never have to repay the loan.
Here are a few options to explore:
- DPA second mortgages: Down payment assistance (DPA) second mortgages are available through many state housing finance agencies. In a DPA second mortgage program, you’ll apply for a 30-year mortgage to finance the home and then another, smaller mortgage to help with the down payment or closing costs. Just like the first mortgage, this second loan comes with an interest rate — although it might be lower than the first — and you repay the balance over time.
- DPA deferred-payment loans: Instead of requiring you to immediately start paying back the down payment assistance funds, some programs allow you to defer these payments until you sell your home, refinance or pay off your mortgage. The assistance won’t accrue interest in the meantime, so the amount you owe won’t grow.
- DPA forgivable loans: Forgivable loans are the closest cousin to homebuying grants because you may not need to pay the money back, provided you live in the home long enough. For example, you might be able to borrow $5,000 toward a down payment, and the loan balance is reduced every month over 10 years. If you stay in the home for 10 years, it’ll be completely forgiven. If you move within the 10 years, you’ll need to pay back a portion of the money.
- Individual Development Accounts (IDAs): IDAs are matched savings accounts typically designed for low-income individuals. IDAs are offered through some public housing organizations and private nonprofits and usually provide a dollar-for-dollar match, up to a specific amount, for savings goals, such as a down payment and closing costs.
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