What is a first-time homebuyer grant?
The defining characteristic of first-time homebuyer grants is that you don’t ever have to pay the money back. The funds can help you cover a down payment on a home, as well as the closing costs you’ll need to pay before you move in.
Because they’re essentially free money, first-time homebuyer grants differ from other types of down payment assistance programs that require you to repay the funds at some point, or stay in the home long enough for the funds to be forgiven. First-time buyer grants also differ from affordable mortgage programs that come with perks like a lower mortgage rate and lower mortgage insurance premiums.
How to qualify for a first-time homebuyer grant
Not all first-time homebuyers are eligible for first-time homeowner grants. These programs tend to be geared toward those classified as a low- or moderate-income borrower, and that definition depends on your income and where you want to live.
While eligibility requirements vary, most grant programs share a few common elements, including:
- Income limits: Many grant programs designate households that earn 80 percent or less of the area median income (AMI) as “low-income,” and limit the program to those in that range. The income limits also vary based on how many people are in the household.
- Home price limits: Again, these limits vary widely based on your state or local housing market.
- Your contribution: Many grants for first-time homebuyers stipulate that the buyer needs to chip in some cash. One common ask is either 1 percent of the purchase price or $1,000, whichever is greater.
- Your residence status: You typically can only get a grant to help buy a home you’ll actually make your primary residence, not one you’ll rent out to someone else or use as a second home.
- Additional education: Many grant programs require you to complete a homebuyer education course before receiving the funds.