Mortgage rates hovering in the mid-6% range have frozen a lot of would-be buyers on the sidelines, but there's a corner of the housing market that keeps quietly moving: down payment assistance.
Thousands of programs across the country are handing out money to first-time buyers, and a surprising number of eligible Americans never even apply.
State housing finance agencies, cities, counties, and nonprofits run more than 2,000 down payment assistance programs nationwide, according to the Urban Institute.
Many offer $10,000 to $50,000 or more, often as a forgivable loan that disappears entirely if you stay in the home for a set number of years.
Buyers assume they earn too much to qualify (income caps are often higher than people expect).
They think the process is a bureaucratic nightmare.
Or their real estate agent simply never mentions it.
The income limits are the detail most people get wrong.
In many markets, a household earning up to 120% of the area median income can still qualify — and in some places the ceiling is higher.
For a family of four in a mid-cost metro, that can mean six figures and still getting help.
The catch, because there's always one, is that assistance usually comes with strings.
You'll typically need to complete a homebuyer education course, which is often free and takes a few hours online.
Many programs require you to use a participating lender, and some set a slightly higher interest rate on the first mortgage to fund the second.
Read the fine print on repayment terms before you sign anything.
These programs generally apply to primary residences only, so no investment properties.
Condos and townhomes sometimes qualify and sometimes don't.
And the money often runs out — many programs operate on a first-come, first-served basis with annual funding that can dry up by summer.
If you want to check what's available, start with your state's housing finance agency website, then look at your city or county's housing department.
HUD also maintains a searchable list of local programs.
A HUD-approved housing counselor can walk you through the options for free — just make sure you're working with a legitimate counselor and not a company charging upfront fees for "guaranteed" assistance.
Getting pre-approved before you tour homes tells sellers you're serious, and it lets you find out early whether you qualify for assistance.
Buyers who wait until after they've made an offer often scramble and miss deadlines.
Our take: down payment assistance isn't a magic fix for an expensive market, and it won't lower your monthly payment much.
But if you've been telling yourself you can't buy because you don't have the cash, it's worth an afternoon of research before you decide that's true.
Final Thoughts
The money is there — it just doesn't come looking for you.