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Short answer
Down payment assistance (DPA) is help from a state, local government, or nonprofit program, usually a grant or a second loan, that lets you buy sooner with a small down payment; saving 20% means waiting longer but typically avoids mortgage insurance and borrowing extra. DPA often comes with income limits, mortgage insurance, and terms that may have to be repaid when you sell or refinance, while a 20% down payment uses only your own money. Neither is right for everyone, so compare the full cost of each path for your situation.
| Feature | Down payment assistance | Saving 20% |
|---|---|---|
| Source of funds | State, local, or nonprofit program, plus any of your own funds | Your own savings |
| Timing | Can let you buy sooner | Takes longer to save |
| Form | Grant, forgivable second, deferred second, or repayable second loan | No second loan |
| Mortgage insurance | Usually required on the first mortgage | Generally not required on a conventional loan |
| Eligibility | Often income limits, price limits, or first-time buyer rules | No program rules beyond the loan itself |
| Paid back? | Depends on the program; some are due when you sell or refinance | Nothing to repay beyond your mortgage |
| Loan pairing | Often used with FHA or conventional loans | Any loan type |
The CFPB notes that many states, local governments, and nonprofits offer programs to make homeownership more affordable, often focused on low- and moderate-income buyers purchasing their first home. Many programs offer down payment assistance that can be used with a regular FHA or conventional loan, and some lend money directly through subsidized loans.
According to the FDIC's guide to state housing finance agency programs, assistance usually comes in one of these forms:
Fannie Mae calls many of these "Community Seconds." Under its rules, the assistance must come from an eligible source such as a government agency or nonprofit, not the seller, and the combined loan-to-value can go up to 105%. A minimum borrower contribution from your own funds is not required.
The CFPB explains that borrowers putting down less than 20% of the purchase price typically need to pay for mortgage insurance. With 20% down on a conventional loan, you generally avoid PMI, borrow less, and have no second loan on the home. The trade-off is time: saving takes longer, and home prices and your situation can change while you save.
If you put less than 20% down on a conventional loan, PMI is not permanent. You can ask your servicer to cancel it when your balance is scheduled to reach 80% of the original value, and it must end automatically at 78%.
Program terms vary widely, so read the details before you rely on one:
Down payment assistance is often worth a close look if:
Saving 20% is often worth a close look if:
A middle path is common too: buying with a smaller down payment, such as putting as little as 3% down for eligible first-time buyers on a conventional loan or as little as 3.5% down for eligible borrowers on FHA, using your own savings.
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It is help from a state, local government, or nonprofit program toward your down payment or closing costs. The CFPB notes that many programs can be used with a regular FHA or conventional loan.
It depends on the program. The FDIC describes forgivable grants, zero-interest deferred second mortgages that are often due when you sell or refinance, and second loans you repay over a set term. Check each program's terms.
No. The CFPB explains that borrowers who put down less than 20% typically pay for mortgage insurance, but many loans allow much smaller down payments.
Usually. The CFPB notes that mortgage insurance is required by many state and local programs.
Sometimes. Many programs focus on first-time buyers, but the CFPB says some are available to people who have owned a home before. Eligibility rules vary by program.
The CFPB suggests contacting a HUD-approved housing counseling agency, and you can also ask lenders which programs they work with.
This page is general education, not a loan offer, commitment, or approval. Program rules and figures change; the figures here were checked against the sources below in October 2026. Your options depend on your credit, income, property, and each lender's guidelines. All loans are subject to approval.
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This page explains the rules. For your situation, compare options yourself or talk with a licensed loan officer.