Down payment assistance
How down payment assistance works in Arizona.
A plain-English explanation of grants, forgivable loans and second mortgages, and what each means for you.
How does down payment assistance work?
Down payment assistance works through an approved lender. The program provides money, usually a second mortgage, that covers part of your down payment or closing costs. It often has no monthly payment and is forgiven over time if you keep the home, but selling or refinancing early may require repayment.
Down payment assistance can sound confusing, so here is the short version: it is money that helps with your down payment, closing costs, or both, and it comes with terms that depend on the program. Knowing the difference between the structures helps you compare options.
Because programs and rules change, treat this as an overview and ask Jan for the current details that apply to you.
Grants, forgivable loans and second mortgages
These are the three structures you will see most often.
- Grant: money toward your costs that you do not repay
- Forgivable loan: a loan that is reduced over time and erased if you stay in the home for the required period
- Second mortgage: a loan, often deferred or low-interest, that is repaid later, when you sell, refinance or pay off the first mortgage, or over time
A simple example, for illustration only
On a $400,000 home, a 3.5% down payment is $14,000. If assistance covers some or all of that, and perhaps part of your closing costs, the amount you need to bring to closing can be much smaller. The exact amount of assistance, and whether it is a grant, forgivable or repayable, depends on the program.
This is only an illustration of the arithmetic and not a quote for any program.
What can still be required of you
Even with assistance, buyers usually still pay certain costs themselves and must qualify for the loan. Ask about what is not covered.
- Earnest money and inspection fees
- Some closing costs and prepaid items
- Reserves or cash a lender may want to see
- Homebuyer education, if the program requires it
Frequently asked questions
Is down payment assistance free money?
Some assistance is a grant that does not need to be repaid, but other forms are forgivable loans or second mortgages with terms. Always confirm the structure before you commit, and Jan can explain each option clearly.
Can down payment assistance be used with any home?
Usually not. Programs often set price limits and require the home to be your primary residence, and some limit which areas or loan types they work with. Jan checks the details for the homes you are considering.
What happens if I sell or refinance later?
It depends on the structure. A grant generally has no payback, a forgivable loan may have a payback if you sell before the forgiveness period ends, and a second mortgage is typically repaid when you sell or refinance. Jan explains this up front.
Ready to see what you qualify for?
Tell Jan what you are hoping to do and she will map out your next steps.