Down Payment and Closing Cost Assistance

When you buy a home, most of the cost is financed as part of your mortgage. But there are two expenses that you'll pay up front: the down payment and closing costs. The good news is that in most cases neither of these payments need to come from your savings. In fact, there are a number of ways you can find the money to pay these expenses.

Down Payments and Closing Costs: What's the difference?

The down payment is the initial amount that you'll pay for a property. It's typically a percentage of the home's purchase price. While it's a myth that buyers need a 20% down payment to buy a home, most mortgages require some upfront investment. That could be as little as 3% of the purchase price.

Closing costs refer to a variety of fees and payments that are associated with processing and finalizing your home loan. Fees include things like recording fees, the appraisal, mortgage insurance, property taxes, and title insurance.

Both the down payment and closing costs are due at your home loan closing and can be some of the biggest hurdles homebuyers face. Fortunately, there's help.

Down Payment and Closing Cost Assistance

Let's say you've found a home and have been approved for a mortgage, but these up-front costs seem overwhelming. Here are some sources to help you come up with the money:

• A gift from your family. This can include anyone you're related to by blood, marriage, adoption, or legal guardianship. It also can include spouses, godparents, children, or other dependents. Even an individual engaged to marry the borrower, a domestic partner, and a former relative can contribute.
• A grant from a business or non-profit. That could be from your church or employer(s), municipalities, nonprofit organizations, or public agencies. If you're a member of a Native American tribe, it can contribute as well. Your lender might also offer down payment assistance or be able to help you identify other resources.
• A small loan. Some organizations can provide additional, smaller loans to help cover down payment and closing costs. These can have a number of flexible options, including loans that defer payments (allowing you to pay them later) or even some that are forgivable (meaning you won't have to pay the money back if you meet specific requirements). You'll want to work with your lender to find the best fit for you and to better understand how programs differ from each other.

Find down payment resources that work for you.