The four main forms of DPA
Grants: Free money. Never has to be repaid. Rare and competitive.
Forgivable second loans: Recorded as a second lien with 0% interest. Forgiven after you live in the home for a set period (usually 5–10 years). Most common form.
Deferred-payment second loans: No monthly payments, but the full balance is due when you sell, refinance, or transfer the home. Not forgiven.
Amortizing second loans: Real monthly payment at a low rate. Rare but exists for closing-cost assistance in some markets.
Most buyers use forgivable seconds. As long as you stay in the home, it functions as free money.
Who qualifies (typically)
Most DPA programs require:
- First-time buyer (no ownership in past 3 years) — most common requirement
- Income below area median income (AMI), usually 80%–120% of AMI
- Homebuyer education course (free, online, 4–8 hours)
- Primary residence only (no investment or second home)
- Purchase price under a program cap (varies by county)
DPA is generally paired with FHA or Conventional 97 loans. Some VA and USDA-compatible DPA programs exist but are rarer.
How to find and apply for DPA in your state
1. Start with your state housing finance agency (HFA). Every state has one. Search '[Your state] housing finance agency.' Most run the biggest DPA in the state.
2. Check city and county programs. Big cities (Phoenix, Denver, Atlanta, Miami) often have supplemental programs that stack with state DPA.
3. Ask your loan officer. Any competent LO knows the DPA programs their state's HFA runs. If yours doesn't, find one who does.
4. Complete the homebuyer education course early. Most DPA requires the certificate before you can apply — don't get to closing without it.
Is this path right for you?
Frequently asked questions
Does DPA hurt my mortgage rate?
Sometimes yes — some DPA programs add 0.125%–0.5% to the first mortgage rate. Others don't. Always compare total 5-year cost with and without DPA.
Can I use DPA for closing costs too?
Yes — most DPA can cover down payment AND closing costs. That means some buyers close for less than $1,000 out of pocket.
What happens if I sell or refinance early?
Depends on the program. Forgivable seconds usually require full repayment if you sell/refi before the forgiveness period. Deferred seconds are always due at sale.
Related guides
- The Complete First-Time Homebuyer's Readiness Guide
- How much home you can actually afford
- Pre-approval checklist
- Back to the Knowledge Base
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