What we verified in “Down payment assistance: how it works”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. According to Fannie Mae, borrowers buying a principal residence may use funds donated from acceptable entities (federal, state and local governments, housing finance agencies, 501(c)(3) nonprofits, Federal Home Loan Banks, employers, tribes and lenders) for all or part of the down payment, closing costs or financial reserves; the grant documentation must state that repayment is not expected, and it is documented with the letter awarding the grant.

   Sources 1 · B3-4.3-06, Grants and Lender Contributions (05/07/2025): 'may use funds donated from acceptable entities for all or part of the down payment, closing costs, or financial reserves'; 'repayment of the grant is not expected'; 'a copy of the letter awarding the grant' · Checked October 17, 2026

2. A Community Seconds loan is a subordinate second loan that may only be funded by an eligible entity (a federal, state or local agency, a housing finance agency, a 501(c)(3) nonprofit, a Federal Home Loan Bank, an employer or a tribe) for the down payment, closing costs, renovations or a permanent rate buydown; with it, the combined loan-to-value ratio may reach 105%.

   Sources 2 · B5-5.1-02, Community Seconds Loan Eligibility (05/03/2023): 'must only be funded by one of the following entities'; 'The maximum CLTV is 105% with a Community Seconds loan' · Checked October 17, 2026

3. According to Fannie Mae, repayment of a Community Seconds loan may be structured in several acceptable ways: fully amortizing, equal monthly payments; payments deferred for a period before switching to monthly payments; payments deferred over the entire term unless the loan is paid off or the home is sold before maturity; or debt forgiven over time. If repayment is deferred for five years or more, the lender does not have to include a monthly payment for that loan in the debt-to-income ratio; if it is deferred for fewer than five years, the lender must include the payment that will come due. The Community Seconds loan must be fixed-rate, and its rate may not be more than 2% (200 basis points) above the first mortgage's initial note rate.

   Sources 2 · B5-5.1-02, Community Seconds Loan Eligibility (05/03/2023), 'Repayment Structure': 'requiring fully amortizing, equal monthly payments'; 'deferring payments for some period before changing to fully amortizing, equal monthly payments'; 'deferring payments over the entire term, unless the loan is paid off or the property is sold before the maturity date of the loan'; 'forgiving debt over time'; 'When repayment of the Community Seconds loan is deferred for five years or more, a lender is not required to include a monthly payment'; 'When repayment is deferred for fewer than five years, the lender must include the monthly payment amount'; 'The Community Seconds loan must be a fixed-rate loan and the interest rate may not be more than 2% (200 basis points) higher than the initial note rate of the first mortgage' · Checked October 17, 2026

4. According to Fannie Mae, with a Community Seconds loan on a one-unit principal residence no minimum contribution from the borrower's own funds is required: all funds needed for the purchase can come from the Community Seconds loan; on a two- to four-unit principal residence financed above 80%, the borrower must contribute at least 5% from their own funds.

   Sources 2 · B5-5.1-02, 'Minimum Borrower Contribution Requirements': 'A minimum borrower contribution from the borrower's own funds is not required'; 'All funds needed to complete the transaction can come from a Community Seconds loan'; 'The borrower must make a 5% minimum contribution from their own funds' · Checked October 17, 2026

5. A holder of a qualified Mortgage Credit Certificate (MCC) issued by a state or local governmental unit uses IRS Form 8396 to figure a credit for part of the mortgage interest paid in the year.

   Sources 4 · About Form 8396, Mortgage Interest Credit (revised March 31, 2026): 'If you were issued a qualified Mortgage Credit Certificate (MCC) by a state or local governmental unit' · Checked October 17, 2026

6. According to IRS Publication 530, the mortgage interest credit is intended to help lower-income individuals afford home ownership; generally, an MCC is issued only with a new mortgage to buy your main home, and you must contact the government agency that issues it before you get a mortgage and buy the home (your state or local housing finance agency knows whether MCCs are available in your area); if the certificate credit rate is higher than 20%, the credit can't be more than $2,000; if you itemize, you must reduce your mortgage interest deduction by the credit; and if you bought with an MCC and sell the home within 9 years, you may have to repay all or part of the benefit.

   Sources 5 · Publication 530 (2025), 'Mortgage Interest Credit': 'intended to help lower-income individuals afford home ownership'; 'Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home'; 'You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home'; 'Contact your state or local housing finance agency'; 'If the certificate credit rate is higher than 20%, the credit you are allowed can't be more than $2,000'; 'you must reduce your home mortgage interest deduction by the amount of the mortgage interest credit'; 'you sell that home within 9 years, you may have to recapture (repay) all or part of the benefit you received from the MCC program' · Checked October 17, 2026

7. HUD publishes income limits by area every year, based on Median Family Income estimates and the Fair Market Rent area definitions for each metropolitan area and each non-metropolitan county; the current edition is fiscal year 2026.

   Sources 6 · Income Limits (HUD User): 'HUD develops income limits based on Median Family Income estimates and Fair Market Rent area definitions for each metropolitan area, parts of some metropolitan areas, and each non-metropolitan county'; 'Statement on FY 2026 Income Limits' · Checked October 17, 2026

8. According to the CFPB, many states and local organizations offer programs to help first-time buyers with a down payment or closing costs; to find programs near you it suggests looking up a HUD-approved housing counseling agency in your area or calling the HOPE Hotline, 24 hours a day, seven days a week, at (888) 995-4673; HUD has an online, nationwide list of agencies that offer guidance on buying your first home.

   Sources 7 · Where can I find information on programs for first-time home buyers? (reviewed September 13, 2024): 'Many states and local organizations offer programs to help first-time buyers with a down payment or closing costs'; 'look up a HUD-approved housing counseling agency in your area'; '24 hours a day, seven days a week, at (888) 995-HOPE (4673)'; 'an online, nationwide list of agencies that offer resources and guidance on purchasing your first home' · Checked October 17, 2026

9. According to the CFPB, you will not receive a Loan Estimate or Closing Disclosure for a subordinate loan through certain types of homebuyer assistance programs; for those you should receive Truth-in-Lending disclosures.

   Sources 8 · What is a Loan Estimate? (reviewed August 9, 2024): 'You will not receive a Loan Estimate or Closing Disclosure if you are shopping for'; 'A subordinate loan through certain types of homebuyer assistance programs'; 'you should receive Truth-in-Lending disclosures' · Checked October 17, 2026

10. Under HUD's regulation, counseling is counselor-to-client assistance that addresses unique financial circumstances or housing issues and focuses on overcoming specific obstacles to a housing goal, such as repairing credit, purchasing a home, locating cash for a down payment or avoiding foreclosure; except for reverse mortgage counseling, all counseling involves an action plan; and education means formal classes, in a group or classroom setting, on topics such as the homebuying process, budgeting and the importance of good credit.

    Sources 9 · 24 CFR §214.3, 'Counseling' and 'Education': 'Counselor to client assistance that addresses unique financial circumstances or housing issues'; 'locating cash for a down payment'; 'all counseling shall involve the creation of an action plan'; 'Formal classes, with established curriculum and instructional goals provided in a group or classroom setting'; 'The homebuying process'; 'Budgeting'; 'The importance of good credit' · Checked October 17, 2026

11. HUD-approved housing counselors give independent advice on buying, renting, defaults and credit, often at little or no cost.

    Sources 10 · Find a Housing Counselor: 'approved by the U.S. Department of Housing and Urban Development (HUD)'; 'independent advice, often at little or no cost to you' · Checked October 17, 2026

12. On a conventional loan for a one-unit principal residence, all funds needed can come from a gift from an acceptable donor, documented with a gift letter.

    Sources 3 · B3-4.3-04, Personal Gifts (02/04/2026): 'All funds needed to complete the transaction can come from a gift'; 'Documentation Requirements' · Checked October 17, 2026

13. According to HUD Mortgagee Letter 2025-09, FHA removed the non-permanent resident sections from its residency requirements entirely, for FHA case numbers assigned on or after May 25, 2025.

    Sources 11 · Mortgagee Letter 2025-09, Revisions to Residency Requirements: 'removes the Non-permanent Residents sections in its entirety'; 'must be implemented for FHA case numbers assigned on or after May 25, 2025' · Checked October 17, 2026

14. USA.gov, the federal government's official portal, warns that promises of 'grants' or 'free money' from the government are often scams, that they can arrive by text, email, ads and websites, and asks people to report those scams to the Federal Trade Commission (FTC).

    Sources 12 · Avoid "free money" from the government scams: 'Promises of "grants" or "free money" from the government are often scams'; 'These could be through texts, email, ads, and websites'; 'Report scams to the Federal Trade Commission' · Checked October 17, 2026