If you have been pursuing the American dream of home ownership on a limited budget you have likely been faced with purchasing homes in foreclosure or through government programs like FHA and HUD.  For many aspiring home owners, the biggest obstacle of getting a home of their own is coming up with the down payment and closing costs, both of which are integral in today’s tougher lending standards. 

In an effort to help more families fulfill their dreams of home ownership and especially to help those who qualify for home ownership in every way except that they don’t have a giant nest egg to invest, the U.S. Department of Housing and Urban Development, or HUD, offers down payment assistance programs through state and local housing authorities and federally subsidized home down payment assistant programs, called the ADDI or American Dream Down Payment Initiative, as well.

Lender participation in HUD down payment assistance programs is voluntary and you may have to seek out a lender who participates in the programs.  It takes a simple phone call to your lender to determine if they participate or not and you will want to check this out before you apply for a down payment assistance grant or loan through HUD. 

With the ADDI program payment assistance is only available if you plan to obtain a Federal Housing Administration or FHA loan. It should be noted that FHA loans require a stricter pre-existing condition for home purchases, meaning if you are buying a fixer-upper you may need to look into addition 203k FHA loans to get the home up to FHA’s standards.  The program is also limited to paying a maximum of 6% or less of the total purchase price.  To qualify for the American Dream Down Payment Initiative program, you must be a first-time home buyer and your income cannot be more than 80 percent of the local median income of the area in which the house is located.

Many states have programs available that provide for down payment grants and interest-free down payment loans.  Additionally, HUD contributes money every year specifically for home down payment assistance programs to state and local housing authorities.  The qualifications for local and state programs vary but you generally have to meet certain income and residency requirements. There are also often limits on the purchase price.

One of the least none facts about HUD’s programs are that the agency does not limit the use of grant money received.  Recipients can use the money toward other costs involved with buying a home like the cost of processing and closing a mortgage loan like inspections, title fees and origination fees.  So if you are putting off your home buying dreams because you are a little short on the down payment, look into HUD assistance programs and don’t give up on your American dream.