You've probably heard that FHA loans require just 3.5% down — and that's true. But for plenty of buyers, especially those purchasing their first home, even 3.5% feels like a stretch. On a $350,000 home, that's $12,250 in cash you need before closing costs even enter the picture. That's where FHA loan down payment assistance comes in. These programs exist to cover some or all of that down payment, and they're used far more often than most people realize.

FHA loans are the most commonly paired loan type with down payment assistance (DPA) programs. There's a good reason for that: FHA's flexible qualification standards — including lower credit score thresholds and more relaxed debt requirements — already appeal to buyers who may not have large savings. Adding DPA on top makes homeownership possible for people who are financially stable but cash-light.

Still, these programs aren't one-size-fits-all, and they come with conditions worth understanding before you apply.

What Is FHA Down Payment Assistance?

Down payment assistance refers to funds provided by a third party — typically a state housing agency, local government, or approved nonprofit — that cover part or all of your FHA down payment. Some programs also help with closing costs.

These aren't shady workarounds or obscure loopholes. They're established, government-backed programs designed to help creditworthy buyers who lack savings but can handle a monthly mortgage payment. According to HUD, FHA's minimum down payment is 3.5% for borrowers with credit scores of 580 or higher — and DPA programs are specifically structured to work within FHA guidelines.

The assistance itself comes in several forms, and the type you receive matters quite a bit.

Types of FHA Loan Down Payment Assistance Programs

Not all DPA works the same way. The four most common structures are grants, forgivable second mortgages, deferred-payment second mortgages, and repayable second mortgages. Here's how they compare:

Comparing Down Payment Assistance Program Types

DPA Type	How It Works	Repayment Required?	Monthly Payment Impact
Grant	A gift of funds — no second lien placed on the property	No	None
Forgivable Second Mortgage	A second lien that's forgiven after a set period (often 5–10 years) if you stay in the home	Only if you sell, refinance, or move out before the forgiveness period ends	Usually none during forgiveness period
Deferred Second Mortgage	A second lien with no monthly payments; due when you sell, refinance, or pay off your first mortgage	Yes — at sale, refinance, or payoff	None during the life of the loan
Repayable Second Mortgage	A second lien with regular monthly payments, often at a low or zero interest rate	Yes — monthly	Adds to your monthly payment

Grants are the most favorable option — no strings attached, no repayment. But they're less common and often have stricter eligibility requirements or lower funding amounts. Forgivable second mortgages are what you'll see most frequently through state housing agencies. As long as you live in the home for the required period (typically 5 to 10 years), the loan goes away entirely.

Who Qualifies for Down Payment Assistance?

Eligibility varies by program, but most DPA programs share a common set of requirements:

Income Limits

Most programs cap household income at a percentage of the area median income (AMI) — often 80% to 115% AMI. These limits are frequently higher than buyers expect. In many Colorado and Florida counties, a household earning $90,000 to $110,000+ could still qualify. The limits change by location and are updated annually.

First-Time Buyer Definition

Many DPA programs require you to be a "first-time homebuyer," but the definition is broader than it sounds. Under most program guidelines, a first-time buyer is anyone who hasn't owned a home in the past three years. If you owned a home six years ago but have been renting since, you likely qualify as a first-time buyer.

Credit Score Requirements

Since these programs layer on top of an FHA loan, you'll need to meet FHA's credit score minimum (580 for 3.5% down). Some DPA programs set their own floors slightly higher — 620 or 640 is common.

Homebuyer Education

According to the Consumer Financial Protection Bureau, many DPA programs require completion of a HUD-approved homebuyer education course. These courses are typically available online and take a few hours. It's a reasonable requirement — and often genuinely helpful.

Property Requirements

The home must be your primary residence. Most DPA programs won't cover investment properties or second homes. Some programs also have purchase price limits tied to your county.

How the Numbers Look: A Real Scenario

Here's an example that shows the difference DPA can make. Use our mortgage calculator to run your own numbers.

Example: $350,000 Home Purchase with FHA Loan (6.5% Interest Rate)

Cost Item	Without DPA	With DPA (Forgivable Second)
Purchase Price	$350,000	$350,000
Down Payment (3.5%)	$12,250 (your cash)	$0 (covered by DPA)
FHA Loan Amount	$337,750	$337,750
DPA Second Lien	—	$12,250 (forgivable over 5 years)
Upfront MIP (1.75%)	$5,911 (financed into loan)	$5,911 (financed into loan)
Est. Monthly Payment (P&I + MIP)	~$2,370	~$2,370
Cash Needed at Closing*	~$22,000–$25,000	~$8,000–$12,000

*Cash needed includes estimated closing costs (2–4% of purchase price). Some DPA programs also cover a portion of closing costs, reducing this further. Exact amounts depend on the specific program, lender fees, and location.

The monthly payments in this example are similar because the forgivable second mortgage has no monthly payment during the forgiveness period. The big difference is how much cash you need upfront.

For buyers comparing FHA to conventional loans, it's worth noting that some conventional programs also allow DPA — but the pairing is less common, and FHA's lower credit requirements make it the go-to choice for most assistance programs.

DPA Programs in Colorado and Florida

Both states have active, well-established down payment assistance options.

Colorado

The Colorado Housing and Finance Authority (CHFA) offers several DPA programs for FHA borrowers, including grants and second mortgage options. CHFA programs are available statewide through participating lenders, with income and purchase price limits that vary by county. Their programs have helped thousands of Colorado buyers afford their first homes. If you're buying in Colorado, talk to a Colorado mortgage broker who works with CHFA regularly — the process has specific steps that not every lender handles the same way.

Florida

Florida Housing Finance Corporation runs multiple DPA programs paired with FHA loans, including forgivable and deferred second mortgages. Many of their programs serve households up to 115% of area median income, and they cover buyers across every Florida county. The Florida Assist program, for instance, provides up to $10,000 as a deferred second mortgage at 0% interest.

Trade-Offs Worth Knowing

DPA programs are a real benefit, but they aren't free of trade-offs. Here's what to weigh:

Slightly higher interest rates. Some DPA programs are funded through mortgage revenue bonds, and the interest rate on your FHA first mortgage may be slightly above current market rates — sometimes 0.25% to 0.50% higher. Over 30 years, that adds up. Run the math and compare.

Residency and repayment conditions. Forgivable loans typically require you to live in the home as your primary residence for the full forgiveness period. If you sell, refinance, or convert the property to a rental before that period ends, you may owe part or all of the DPA back.

Additional lien on your property. Even a forgivable loan is recorded as a lien. That adds a layer of complexity if you want to refinance later, because both lien holders may need to approve the process.

Limited lender participation. Not every lender offers every DPA program. You'll need to work with a lender who's approved by the specific program you want to use. This is one area where working with a broker who knows the local programs well can save you time and headaches.

None of these trade-offs are deal-breakers, but they're real factors. A DPA program that saves you $12,000 upfront but costs you $15,000 in extra interest over ten years is still worth understanding fully before you commit.

When DPA Makes Sense — and When It Might Not

DPA programs make a lot of sense if you have stable income, manageable debt, and decent credit — but just haven't been able to save a large lump sum. That describes a lot of people, especially renters paying high monthly costs in markets like Denver, Colorado Springs, Tampa, or Miami.

They might not be the best fit if you're planning to move within a few years (forgivable loans won't fully forgive), if the rate increase significantly impacts your budget, or if you qualify for other programs with better terms. For example, other loan programs like VA loans offer zero down payment with no second lien at all.

The right answer depends on your full financial picture — not just whether a program exists.

Frequently Asked Questions