First-time homebuyer grants: essential information to consider

The largest purchase you'll ever make is likely to be your house, and saving up for the down payment can be the most challenging part of the process. However, many banks offer grants to help borrowers, particularly first-time and low-income buyers, make their down payment. These grants can also be used to cover closing costs or other fees, and in most cases, the money doesn't need to be repaid.

First-time homebuyers can receive grants from various sources, including government agencies, nonprofits, and community organizations. To learn more about these grants, including eligibility and application requirements, read on.

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How to qualify for a first-time homebuyer grant

First-time homebuyers may be eligible for various public and private grants, but eligibility standards vary greatly. Most government agencies and financial institutions consider anyone who hasn't bought or owned a principal residence in the last three years a first-time homebuyer. While some grants are marketed toward first-time homebuyers, existing homeowners may also be eligible for many programs. However, the grants may have income and home price limits, and be limited to certain cities or a select list of properties.

Before applying for a mortgage, inquire about grant options from your lender to access all eligible programs.

Bank grants

First-time homebuyers may be eligible for grants offered by top banks, but their mortgage must be with that bank and the grant could be considered taxable income.

Bank of America

Bank of America provides up to $7,500 in mortgage rate reduction for buyers of homes in low- to moderate-income census tracts through its America's Home grant program. However, there are maximum income and loan amount limits, and applicants must have a loan-to-value ratio of at least 80%.

In select markets, Bank of America offers a down payment grant of 3% of a house's purchase price, up to $10,000, to homebuyers who complete a homebuyer education course.

Chase

Eligible borrowers can receive up to $7,500 from the Chase Homebuyer Grant to reduce their interest rate, cover closing costs, or increase their down payment.

Borrowers can access the loan in 15 metro areas, including Atlanta, Chicago, Dallas, Los Angeles, Miami, New York, and San Diego, with a Chase DreaMaker loan or a conventional, FHA, or VA mortgage.

Wells Fargo

The Homebuyer Access grant from Wells Fargo offers up to $10,000 towards a down payment for eligible buyers in eight metro areas, including Atlanta, Baltimore, Dallas, Minneapolis, New York, and Philadelphia.

Homeowners in these cities who earn up to 80% of the area median income can apply for a Wells Fargo Dream Plan Home mortgage and receive a closing cost credit of up to $5,000.

PNC

The PNC Closing Cost Assistance Grant is a $5,000 credit that can be used for your down payment, closing costs, or other fixed expenses. To be eligible, your household income must not exceed 80% of the median income in your area or the property must be located in a qualifying community.

Citibank

The Lender Paid Assistance program at Citibank offers a $7,500 credit towards closing costs on a primary residence in specific areas in Atlanta, Austin, Dallas, Denver, Houston, Philadelphia, and Cambridge, Massachusetts. To be eligible, borrowers must meet income requirements and complete a homebuyer education course.

Ally Bank

Borrowers from Ally Bank who reside in eligible neighborhoods in Detroit, Philadelphia, and Charlotte, North Carolina, can apply for a $5,000 grant to assist with their down payment or closing costs. The borrowers must not exceed 100% of the median income in the area where the home is situated.

Federal grants

The government offers several homebuying grants, tax credits, and forgivable loans, which are funded by the federal government.

HomePath Ready Buyer program

Fannie Mae's HomePath program offers buyers up to 3% towards closing costs on as-is homes, which are usually available due to foreclosure or short sale, and can equal as much as 6% of the home's purchase price.

HomeReady and Home Possible credits

Borrowers who receive a Fannie Mae HomeReady or Freddie Mac Home Possible mortgage can receive a $2,500 credit toward a down payment or closing costs until February 2025. However, applicants must not exceed 50% of the median income in the area where the property is located.

Good Neighbor Next Door program

The Good Neighbor Next Door grant, issued by the U.S. Department of Housing and Urban Development (HUD), is available to teachers, firefighters, police officers, and EMTs who want to buy a home in the area they serve. HUD will cover up to 50% of the cost of the home, provided the buyer has not purchased a home in the last 12 months and agrees to stay in the property for at least three years. Participants must work with a HUD-approved real estate broker and choose a home from a list of properties in HUD-designated revitalization areas. Homes are sold as-is, and inventory is extremely limited. Borrowers must take out a second mortgage in the amount of the discount. If the three-year occupancy requirement is met, no interest will accrue, and no payment is required.

State and local grants

You can find information on grants and forgivable loans for housing on your state, local, or county website, or through Freddie Mac's DPAOne database, which offers hundreds of programs.

• Public servants in Texas, including educators, police officers, and firefighters, may be eligible for the Home for Texas Heroes grant, which covers up to 2% of total loan and closing costs. To qualify, applicants must earn no more than 80% of the area median income and have a credit score of 620.
• The Illinois Housing Development Authority (IHDA) offers a down payment assistance program called IHDA Access Forgivable, which forgives up to 4% of your mortgage over 10 years, up to $6,000. To be eligible, you must have a 640 credit score, complete homeownership counseling, and meet the income and home price limits set by the state.
• The HomeFirst Down Payment Assistance program offers up to $100,000 in assistance to first-time homebuyers in New York City. To qualify, you must have a 3% down payment, earn no more than 80% of the area median income, and complete a homeowner education program.

National Homebuyers Fund

The National Homebuyers Fund, a nonprofit organization, offers a grant of up to 5% of the home's purchase price to borrowers who commit to making the property their primary residence for at least five years. This forgivable grant can be used towards a down payment or closing costs, as long as your lender participates in the program.

More assistance for first-time homebuyers

If you don't qualify for a grant, there are other programs available to help you attain your dream of owning a home.

• First-time buyers with a credit score of 620 can put down just 3% with HomeOne mortgages, which are backed by Freddie Mac.
• Just 3% down payment is required for conventional 97 mortgages, which can be guaranteed by Freddie Mac or Fannie Mae.
• VA loans and USDA loans have no down payment requirements.
• Down payment assistance loans can aid in purchasing a home and may allow for deferred or even forgiven payments.

Bottom line

Obtaining a grant to save up for your first home can be challenging, but there are both private and public grants available that do not need to be repaid. Research mortgage providers in your area and explore grant options from federal, state, and local government agencies. Even if you're not a first-time buyer, you may still be eligible for a grant to help with your down payment, interest rate, or closing costs.

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