Would you like to keep more funds in reserve to maintain your home and make your regular mortgage payments? Down payment and closing cost assistance solutions assist qualified borrowers with filling the cost gap from a variety of authorized sources. Some of the Down payment sources and how to finance are:


Administered by HUD, the HOME Investment Partnerships Program is the largest federal block grant to state and local governments (including HFAs), and is designed exclusively to create affordable housing for low-income households (those earning 80 percent or less of the area median income).

  • Through HOME, annual formula grants to states and localities are provided that communities use – often in partnership with local nonprofit groups – to fund a wide range of activities that build, buy, and/or rehabilitate housing for homeownership or rental or provide direct rental assistance to low-income individuals and families.
  • HOME provides participating jurisdictions with a line of credit to draw upon, as needed, to use for grants, direct loans, loan guarantees or other forms of credit enhancement, or rental assistance or security deposits.
  • States are automatically eligible for HOME funds and receive either their formula allocation or $3 million, whichever is greater. Local jurisdictions eligible for at least $500,000 under the formula can receive an allocation. Communities that do not qualify for an individual allocation under the formula can join with one or more neighboring locality so that members’ combined allocation would meet the threshold for direct funding.
  • Eligible jurisdictions receiving funds must provide 25 cents of their own funds for every HOME dollar received. HOME state and local government grantees, or designees, administer these programs and accept applications from eligible mortgage-ready borrowers seeking funding. – Freddie Mac.

MCC – Mortgage Credit Certificate

Mortgage credit certificates are issued by certain state or local governments, including state housing finance agencies. They generally allow homeowners to claim approximately 20 percent of their annual mortgage interest as a yearly tax credit throughout the life of their original first mortgage.

  • The amount of credit per mortgage loan is capped by the Internal Revenue Service at $2,000 per year.
  • Mortgage lenders often use the estimated amount of the credit on a monthly basis as additional income to help the potential borrower qualify for the loan.
  • Homebuyers who wish to obtain an MCC must meet certain minimum guidelines (restrictions may be waived by the issuing entity in certain circumstances): (1) must not have owned a home in the previous three years; (2) must meet income and purchase price restrictions; and (3) must use the new home as a primary residence.


  • One of HUD’s longest-running programs, the Community Development Block Grant (CDBG) program provides communities with resources to address a wide range of unique community development needs including affordable housing, anti-poverty programs, and infrastructure development.
  • CDBG funds are allocated to more than 1,100 local and state governments called “entitlement” and “non-entitlement” communities.
  • Entitlement communities are annual grants to larger cities and urban counties to develop viable communities by providing decent housing, a suitable living environment, and opportunities to expand economic opportunities, principally for low- and moderate-income individuals and families.
  • With non-entitlement communities or state-administered CDBGs (also known as the Small Cities CDBG Program), states award grants to smaller units of general local government for community development activities. Annually, each state develops funding priorities and criteria for selecting projects.
  • HUD determines the amount of each CDBG entitlement grant by a statutory dual formula which uses the needs of the community, extent of poverty, population, housing overcrowding, age of housing, and population growth lag in relation to other metropolitan areas.
  • CDBGs differ from categorical grants; they are made for specific purposes in that they are subject to less federal oversight and are largely used at the discretion of the state and local governments.

NSP - Neighborhood Stabilization Program

A component of the Community Development Block Grant program, HUD provides Neighborhood Stabilization Program (NSP) grants to communities hardest hit by foreclosures and delinquencies to purchase, rehabilitate, or redevelop homes and stabilize neighborhoods.

  • Grantees (government agencies or nonprofits administering the program) develop their own programs and funding priorities, but must use at least 25 percent of the funds appropriated for the purchase and redevelopment of abandoned or foreclosed homes or residential properties that will be used to house individuals or families whose incomes do not exceed 50 percent of the area median income.
  • All activities funded by NSP must benefit low- and moderate-income persons whose income does not exceed 120 percent of the area median.
  • Eligible NSP activities can include (but are not limited to): (1) the direct purchase and rehabilitation of abandoned and foreclosed homes for sale, rent, or redevelopment; (2) the establishment of financial mechanisms for purchase and redevelopment of foreclosed homes and residential properties; and (3) the demolition of blighted structures.

Conventional Home Possible mortgage

  • LTV: Maximum LTV of 97 percent; TLTV 105 percent.
  • Property Options: 1-unit properties, condos and planned unit developments; manufactured homes are not eligible.
  • Flexible Sources of Down Payments: Down Payment can come from a variety of sources, including family, employer-assistance programs and secondary financing.
  • Cancellable Mortgage Insurance (video): Mortgage insurance (MI) can be cancelled after loan balance drops below 80 percent of the home's appraised value.
  • Stable Mortgages: Fixed-rate mortgages with a term of up to 30 years.
  • Refinance Flexibility (video): Purchase and no cash-out refinancing options available.
  • Income Flexibility (video): Borrowers with incomes above AMI may be eligible in high-cost areas. No income limits in underserved areas. Use the Home Possible Income & Property Eligibility Tool to see income limits for specific properties.
  • Primary Residence Only: All borrowers must occupy the property as their primary residence.

Conventional HomeReady® mortgage

Designed for creditworthy low- to moderate-income borrowers, it features:

  • Financing up to 97% loan-to-value (LTV) for purchase of one-unit principal residence (DU is required for LTV ratios >95%); up to 95% LTV for limited cash-out refi (LCOR) and up to 97% LTV for LCOR transactions in DU when the mortgage being refinanced is owned or guaranteed by Fannie Mae
  • Borrower is not required to be a first-time buyer
  • Cancellable mortgage insurance (restrictions apply); lower MI coverage (25% for LTVs >90% to 97%) compared with standard requirements
  • Gifts, grants, Community Seconds®, and cash-on-hand permitted as a source of funds for down payment and closing costs
  • Supports HomeStyle ® Energy, manufactured housing, and HomeStyle Renovation (approved lenders)
  • Innovative underwriting flexibilities expand access to credit responsibly. Flexibilities include:
    • Rental unit and boarder income
    • Non-occupant borrowers, such as a parent
    • Income from non-borrower household members considered as a compensating
    • Low down payment. As low as 3% down payment for home purchase and refinance transactions.
    • Flexible sources of funds. Can be used for the down payment and closing costs with no minimum contribution required from the borrower’s own funds (1-unit).
    • Affordable and cancellable monthly MI. Reduced MI coverage requirement above 90% LTV; cancellable MI per Servicing Guide policy.
    • Homeownership course. The online Framework® course prepares borrowers for sustainable homeownership.

MortgageGrants.com helps potential homebuyers determine their eligibility for a program and searches for potential funding sources. 


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