Down Payment Assistance for Conventional Loans in 2026
Last updated 05/20/2026 by
Ante Mazalin
Edited by
Andrew Latham
Summary:
Down payment assistance for conventional loans is a category of grants, forgivable loans, and subsidized second mortgages that reduce the upfront cash required to buy a home using a Fannie Mae or Freddie Mac conventional mortgage, with programs available at the federal, state, and local levels.
Several program structures are compatible with conventional financing, each suited to a different buyer profile.
- Fannie Mae HomeReady: Allows DPA from government agencies, nonprofits, and lenders; income limit is 80% AMI with a 3% minimum down payment.
- Freddie Mac Home Possible: Accepts grants and Affordable Seconds as down payment sources; income limit is 80% AMI with a 660 minimum credit score for purchases.
- Community Seconds / Affordable Seconds: The official second-mortgage frameworks from Fannie Mae and Freddie Mac that allow subsidized DPA loans to stack on top of a conventional first mortgage up to 105% combined LTV.
- State HFA programs: Available in every state, typically offering 2–5% of the purchase price as a grant or second mortgage, and often pairable with conventional loans.
Most homebuyers assume down payment assistance only works with FHA loans. That assumption closes the door on programs that can work just as well, sometimes better, with a conventional mortgage.
If you earn too much for FHA-specific aid or want to avoid FHA’s permanent mortgage insurance, conventional DPA programs are worth a close look.
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Can you get down payment assistance with a conventional loan?
Yes. Down payment assistance is compatible with conventional loans, including Fannie Mae and Freddie Mac products. The misconception that DPA is FHA-only comes from the fact that many state programs default to FHA for their paired first mortgage, but that is a program choice, not a rule.
Fannie Mae and Freddie Mac each have formal frameworks for accepting subordinate financing, grants, and lender contributions as down payment sources. Fannie Mae calls its structure Community Seconds. Freddie Mac calls its version Affordable Seconds.
Both allow a subsidized second mortgage to cover all or part of the 3% minimum down payment on eligible conventional loans, and both permit combined LTV ratios up to 105% when a qualifying second mortgage is used.
To understand how down payment assistance programs work in general before comparing loan types, that overview covers the mechanics of grants, deferred loans, and forgivable structures.
Programs that work with conventional loans
The table below shows the main programs and structures compatible with conventional financing, along with key eligibility notes.
| Program | Assistance Amount | Type | First-Time Buyer Required? | Income Limit |
|---|---|---|---|---|
| Fannie Mae HomeReady + Community Seconds | Varies by provider; covers up to full 3% down | Grant or subsidized second mortgage | No (required only for $2,500 lender credit) | ≤80% AMI |
| Freddie Mac Home Possible + Affordable Seconds | Varies by provider; covers up to full 3% down | Grant or subsidized second mortgage | No (required only for $2,500 lender credit) | ≤80% AMI |
| State HFA Programs | Typically 2–5% of purchase price | Grant or deferred second mortgage | Often yes (exceptions in targeted areas) | Varies by state |
| National Homebuyers Fund (NHF) | Up to 5% of loan amount | Grant | No | Income limits apply |
State HFA programs are available in every state. Many pair their DPA with a conventional first mortgage rather than FHA, particularly for borrowers whose credit profile and income make conventional financing the better fit. The down payment assistance programs by state guide lists current options across all 50 states.
The National Homebuyers Fund offers up to 5% of the loan amount as a grant with no first-time buyer requirement, subject to income limits. More information is available at nhfloan.org.
HomeReady and Home Possible: how they work with DPA
HomeReady and Home Possible are Fannie Mae’s and Freddie Mac’s respective low-down-payment conventional products. Both are specifically designed to accept DPA from outside sources.
Under HomeReady, eligible down payment sources include grants and contributions from federal, state, or local government agencies; nonprofits; employers; and lenders, according to Fannie Mae’s Selling Guide (Section B3-4.3-06). Personal gifts from family members and domestic partners are also permitted for primary residences.
Under Home Possible, Freddie Mac accepts grants, gifts, and Affordable Seconds as down payment sources. Freddie Mac also allows sweat equity and employer contributions, per the Home Possible fact sheet published by Freddie Mac in February 2026.
Both programs cap income eligibility at 80% of the area median income (AMI) for the property’s county. Both require a minimum 3% down payment.
The credit score minimums differ. HomeReady requires a minimum 620 score. Home Possible requires a minimum 660 for purchase loans. These are not interchangeable — do not assume the lower threshold applies to both programs.
Neither program requires first-time buyer status for standard eligibility. However, the $2,500 lender credit available to borrowers at or below 50% AMI requires at least one borrower to be a first-time homebuyer. Fannie Mae added this requirement on January 28, 2026, per Lender Letter LL-2024-01. Freddie Mac carries the same first-time buyer requirement for its $2,500 lender credit.
Community Seconds and Affordable Seconds explained
Community Seconds (Fannie Mae) and Affordable Seconds (Freddie Mac) are the formal frameworks that allow a subsidized second mortgage to be stacked on a conventional first mortgage as a down payment source.
Fannie Mae’s Community Seconds structure permits a combined LTV of up to 105%, meaning the first and second mortgage together can exceed the home’s purchase price when the second mortgage comes from an eligible affordable housing program, according to Fannie Mae’s Selling Guide (Section B5-5.1-02).
Freddie Mac’s Affordable Seconds allow the same 105% TLTV maximum. The second mortgage must be provided by a government agency, credit union, or community development financial institution (CDFI) under a documented ongoing program, per Freddie Mac’s Single-Family Seller/Servicer Guide (Sections 4204.1 and 4204.2).
The second mortgage cannot be funded through the first lien transaction itself, such as through rate premium pricing or discount points built into the first loan, under either framework.
How to qualify for DPA on a conventional loan
Qualification requirements span both the conventional loan and the DPA program. Borrowers need to satisfy both sets of criteria.
- Credit score: HomeReady requires 620 minimum. Home Possible requires 660 minimum for purchases. Individual DPA programs may set higher minimums. If your score falls short, the options for qualifying with lower credit guide covers strategies.
- Income limits: HomeReady and Home Possible both cap household income at 80% AMI. State and local programs have their own limits, which vary significantly. The area median income (AMI) article explains how these thresholds are calculated.
- Owner-occupancy: The purchased home must be your primary residence. Investment properties and second homes are not eligible for DPA on conventional loans.
- Homebuyer education: HomeReady, Home Possible, and most DPA programs require completion of a homebuyer education course before closing. The Framework course (try.frameworkhomeownership.org/get-started) is a widely accepted online option that takes 4–6 hours and costs $75.
- Debt-to-income ratio: Standard conventional underwriting guidelines apply. Most lenders look for a DTI at or below 45%, though DU (Fannie) and LPA (Freddie) automated underwriting may approve higher ratios in some cases.
For a full breakdown of the qualification process, the down payment assistance for first-time homebuyers guide covers shared requirements across program types.
How to apply for down payment assistance with a conventional loan
Applying for DPA alongside a conventional loan requires a coordinated sequence. Doing the steps out of order is the most common reason applications stall.
- Check your income against AMI. Look up the AMI for your target county at the HUD website (huduser.gov/portal/datasets/il.html) and confirm your household income falls at or below 80% to qualify for HomeReady or Home Possible.
- Research programs in your state. Contact your state housing finance agency directly or use the HUD-approved housing counselor locator at hud.gov/find/counseling. Local nonprofits and city/county housing offices often run programs not listed in national databases.
- Get pre-qualified with a participating lender. Not every lender offers DPA-paired conventional loans. Confirm your lender is approved to originate HomeReady or Home Possible and is familiar with the specific DPA program you plan to use.
- Complete a homebuyer education course. Most programs require a certificate of completion before closing. The Framework course costs $75 and takes 4–6 hours online. Register at try.frameworkhomeownership.org/get-started.
- Submit your DPA application separately. DPA applications are processed through the program provider, not your lender. Gather income documentation, proof of identity, and any occupancy or first-time buyer affidavits the program requires.
- Coordinate closing timelines. DPA funds must be confirmed and available before your closing date. Build in buffer time — DPA processing can take two to four weeks longer than standard mortgage approval.
How much can DPA cover on a conventional loan?
On a conventional loan with a 3% minimum down payment, DPA can cover the entire required down payment in many programs. Here is what the numbers look like on a $350,000 home.
| Scenario | Home Price | Down Payment (3%) | DPA Covers | Borrower Cash Required |
|---|---|---|---|---|
| State HFA grant (3%) | $350,000 | $10,500 | $10,500 | $0 for down payment (closing costs separate) |
| NHF grant (5% of loan) | $350,000 | $10,500 | ~$16,975 (5% of $339,500 loan) | $0 for down payment; surplus may offset closing costs |
| Community Seconds (second mortgage) | $350,000 | $10,500 | Up to $10,500 | $0 for down payment; second mortgage repaid separately |
PMI is still required on conventional loans with less than 20% down, even when DPA covers the down payment. However, if a DPA grant is large enough to bring the combined down payment to 20% or more of the purchase price, PMI is not required because the loan-to-value ratio is at or below 80%. This is one scenario where a DPA grant offers a PMI-elimination advantage over a standard 3%-down conventional loan.
For a broader look at the trade-offs before committing, the pros and cons of using down payment assistance guide covers both the benefits and the costs to watch for.
Pro tip: Some DPA programs are funded through a slight rate premium above market rate, meaning your lender receives yield to fund the assistance. Before accepting, compare the APR on the DPA-paired loan against a standard conventional loan without assistance. If the rate premium adds up to more than the DPA benefit over your expected holding period, the conventional loan without DPA may cost less overall.
FHA vs. conventional with DPA: which is better?
The better option depends on your credit score, income, and how long you plan to keep the loan. Neither is universally superior.
| Factor | FHA with DPA | Conventional with DPA |
|---|---|---|
| Minimum credit score | 580 (3.5% down); 500 (10% down) | 620 (HomeReady); 660 (Home Possible) |
| Minimum down payment | 3.5% | 3% |
| Mortgage insurance | Upfront MIP + annual MIP for life of loan (in most cases) | PMI required under 20% LTV; cancellable at 20% equity |
| Income limits for DPA | Varies by program; some FHA DPA has no limit | HomeReady and Home Possible both cap at 80% AMI |
| Gift funds allowed | Yes, from family and eligible donors | Yes, from family and eligible donors (primary residence) |
| DPA second mortgage allowed | Yes, via HUD-approved structures | Yes, via Community Seconds or Affordable Seconds |
| Best for | Buyers with credit scores below 620 or limited savings | Buyers with 620+ scores who want cancellable PMI |
FHA loans carry mortgage insurance for the life of the loan when the down payment is below 10%, which adds to the long-term cost. Conventional PMI is cancellable once you reach 20% equity, making conventional loans with DPA the more cost-efficient choice over time for borrowers who qualify.
For buyers whose scores fall below 620, FHA with DPA is likely the more accessible path. Buyers above that threshold should run both scenarios side by side before choosing. The down payment assistance for first-time buyers overview compares program structures across both loan types.
Other ways to lower your down payment on a conventional loan
DPA programs are the most direct path, but they are not the only option for reducing upfront costs on a conventional loan.
- Gift funds: Fannie Mae and Freddie Mac both allow gift funds from family members, domestic partners, and individuals with a long-standing familial relationship to cover the entire down payment on a primary residence. The gift cannot come from the seller or any other interested party to the transaction.
- Employer assistance: Some employers offer homebuyer assistance as a benefit. Fannie Mae’s HomeReady and Freddie Mac’s Home Possible both accept employer contributions as an eligible down payment source.
- Sweat equity: Freddie Mac’s Home Possible program accepts sweat equity, the value of labor contributed by the borrower, as a down payment source on eligible properties. Fannie Mae does not currently accept sweat equity under standard guidelines.
A different path to homeownership worth understanding is leasehold ownership. Jubilee is a program that sells homes at below-market prices on a leasehold basis, which dramatically lowers the purchase price and down payment amount. It is not a DPA program, but it addresses the same affordability barrier from a different angle.
Before pursuing a leasehold model, it is worth understanding the trade-offs of leasehold homeownership, including resale restrictions and land lease costs.
Key takeaways
- Down payment assistance is fully compatible with conventional loans. The idea that DPA is FHA-only is a common misconception, not a rule.
- Fannie Mae’s HomeReady and Freddie Mac’s Home Possible are the primary conventional loan products designed to accept DPA, with income limits at 80% AMI and 3% minimum down payments.
- Community Seconds (Fannie Mae) and Affordable Seconds (Freddie Mac) allow subsidized second mortgages to cover the down payment on a conventional loan, with combined LTV up to 105%.
- HomeReady requires a minimum 620 credit score; Home Possible requires 660 for purchases. These minimums are different and should not be treated as interchangeable.
- If DPA brings your total down payment to 20% or more, PMI is not required on a conventional loan. PMI on a conventional loan is cancellable once you reach 20% equity, unlike FHA mortgage insurance.
- The $2,500 lender credit under both HomeReady and Home Possible requires at least one borrower to be a first-time homebuyer, in addition to the 50% AMI income threshold, per updates effective January 28, 2026.
- Some DPA programs carry a rate premium that increases the loan’s APR. Compare the all-in cost against a non-DPA conventional loan before committing.
Frequently asked questions
Is there down payment assistance for conventional loans specifically?
Yes. Fannie Mae HomeReady and Freddie Mac Home Possible are both conventional loan programs built to accept down payment assistance from grants, second mortgages, and lender contributions. State HFAs and the National Homebuyers Fund also offer DPA that pairs with conventional financing.
Can I use a grant for the down payment on a conventional loan?
Yes. Fannie Mae’s Selling Guide (Section B3-4.3-06) explicitly allows grants from government agencies, nonprofits, employers, and lenders as down payment sources on conventional loans for primary residences. The grant cannot come from the seller or an interested party to the transaction.
What is the minimum credit score for a conventional loan DPA?
HomeReady requires a minimum 620 score. Home Possible requires a minimum 660 for purchase loans. Individual DPA programs may set their own minimum, often 640 or higher, so borrowers need to satisfy both the loan program and the DPA program requirements.
Does DPA affect PMI on a conventional loan?
It depends on the loan-to-value ratio after assistance. If DPA brings the total down payment to 20% or more, PMI is not required. If LTV remains above 80%, PMI is still required, but it is cancellable once the borrower reaches 20% equity, unlike FHA mortgage insurance which typically stays for the life of the loan.
Do I have to be a first-time homebuyer to use DPA with a conventional loan?
Not for most programs. HomeReady and Home Possible do not require first-time buyer status for standard eligibility. However, the $2,500 lender credit available to borrowers at or below 50% AMI does require at least one borrower to be a first-time homebuyer as of January 28, 2026. Many state HFA programs require first-time buyer status, with exceptions in federally designated targeted areas.
What DPA structures are not allowed on conventional loans?
DPA funded through the first mortgage transaction itself, such as through rate premium pricing or discount points built into the first loan, is not permitted under Fannie Mae Community Seconds or Freddie Mac Affordable Seconds rules. Some state HFA programs also restrict their DPA to use only with an HFA-issued first mortgage, which would make them incompatible with a standard conventional loan through another lender.
What income limits apply for a conventional loan DPA?
HomeReady and Home Possible both cap household income at 80% of the area median income (AMI) for the property’s county. State HFA programs and the NHF have their own limits, which vary by location and program. Use HUD’s AMI lookup tool to find the specific threshold for your county.
Ready to compare mortgage lenders? Review home loan options on SuperMoney to see rates and lender details side by side.
Down Payment Assistance by Buyer Type
- Down Payment Assistance for Non-First-Time Home Buyers
- Down Payment Assistance for First-Time Home Buyers
- Down Payment Assistance for Veterans
- Down Payment Assistance for Seniors
- Down Payment Assistance for Teachers
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