What first-time homebuyer down payment assistance programs exist, and how do they work?

Down payment assistance (DPA) programs are offered mainly by state housing finance agencies, cities, and some nonprofits, and they come in a few forms: grants that never need repayment, forgivable loans that disappear after you live in the home a set number of years, deferred loans repaid only when you sell or refinance, and low-interest second mortgages. Eligibility usually depends on income limits, purchase-price caps, and completing a homebuyer education course, and many require you to be a first-time buyer, defined as not owning a home in the past three years. Amounts range from a few thousand dollars to 5% or more of the price. Search your state HFA's website and ask lenders which programs they participate in, since not all do.