Common Questions About Down Payment Assistance
October 20, 2025
What is a down payment assistance (DPA) grant for an FHA loan?
A down payment assistance grant is a gift of money, often from a state or local housing agency, that FHA borrowers can use to cover their minimum 3.5% down payment and sometimes a portion of their closing costs. Because it is a grant, it does not need to be repaid. Not all DPA is offered in the form of a grant, some may be offered as forgivable loans or other options.
How does a DPA grant work?
The funds are provided to the homebuyer at closing to satisfy the FHA's financial requirements. This allows buyers to purchase a home without having to spend years saving for a large initial investment. The assistance is typically administered by state housing finance agencies or nonprofit organizations.
Can you provide an example of a DPA program?
The Texas Department of Housing and Community Affairs offers the "My First Texas Home" program. It provides assistance of up to 5% of the total loan amount for first-time homebuyers and veterans. This is enough to cover the entire 3.5% FHA down payment, with the remainder available for closing costs.
What are the typical requirements to qualify for a DPA grant?
While requirements vary by program, common qualifications include being a first-time homebuyer, meeting specific income and purchase price limits for the area, having a minimum credit score (often around 620), and completing a homebuyer education course.
What should I know before using a DPA grant?
You should know that not all FHA-approved lenders participate in DPA programs, so you will need to find one that does. Also, be prepared to complete a mandatory homebuyer education course, which is a standard requirement for most programs.
Are there any downsides or pitfalls to using a DPA grant?
One is that the FHA loan that accompanies the grant may have a slightly higher interest rate than a loan obtained without assistance. Over the life of the loan, this can result in paying more in total interest. Borrowers must weigh the immediate benefit of the grant against this long-term cost.
FHA Loan Articles
July 30, 2026There is a common misconception about FHA loans that only a first-time home buyer can use the program. This is not true; repeat buyers can qualify for an FHA loan, but why does this misconception exist? Partially because state and local programs have first-time buyer requirements for down payment and/or closing cost assistance programs. So while you do not need to be a first-time buyer to get an FHA loan, you may need to meet that definition to qualify for down payment help.
July 29, 2026When you buy a home with an FHA mortgage, you have an option to apply for a cash-out refinance to take equity in your home out in cash. These loans are offered to those with 80% equity in the home or better, and you can apply for this type of cash-out refinancing once you hit that 80% mark. Many choose to wait until their equity is much higher to achieve the best results, and it pays to factor in your closing expenses and lender fees when running the numbers to assess how affordable this option is given your budget and financial goals.
July 28, 2026FHA loan rules require escrow, and the funds used to fund escrow must come from approved sources. FHA loan rules require the lender to verify funds for earnest money or closing costs and will not allow sources such as payday loans, credit card cash advances, or non-collateralized loans. If you have never opened an escrow account before, there are some important details to know before you start.
July 20, 2026Escrow accounts play a central role in managing property taxes and insurance for FHA mortgages. Understanding escrow accounts is an important part of being a new home owner, especially if you have plans to refinance the property at some point and want to know your options to get out of escrow. We examine some key points here about revising and canceling escrow on an FHA mortgage.
July 18, 2026Many home purchasers hold incorrect assumptions about FHA mortgage rules and restrictions. These loans are not limited to first-time buyers, for example, and there is no age limit for FHA loans. FHA borrowers may apply for more than one FHA mortgage, but these loans are for owner-occupied residences only. We examine some important points on these issues, including when you can and cannot have more than one FHA loan at a time.
