The down payment stops more first-time buyers than anything else. Not the monthly payment. Not the credit score. Not the interest rate. The lump sum of cash required before you can even get to the closing table is the single biggest barrier between renters and homeowners across Virginia and the country.
Here’s what most buyers don’t know: down payment assistance programs exist specifically to solve this problem, they are widely available, and they are designed to layer directly on top of FHA loans. These aren’t obscure workarounds or too-good-to-be-true offers. They are funded programs administered by state housing finance agencies, counties, and HUD-approved nonprofits — and they are actively looking for qualified buyers.
Quick Answer: Down payment assistance programs (DPA) are grants, forgivable loans, or second mortgages offered by state housing finance agencies, counties, and nonprofits. Most require pairing with a first mortgage — and FHA’s 3.5% minimum down payment is the most DPA-compatible loan program available, making the FHA + DPA combination the dominant structure for first-time buyers who want to reach the closing table with less cash out of pocket.
This guide focuses primarily on Virginia, with the Richmond metro as the anchor geography, and applies to buyers in Florida, Tennessee, Georgia, and the DC area as well. If you’ve been delaying homeownership because you can’t see where the down payment comes from, this is where that changes.
Three Forms of DPA — and Why the Structure Matters
Down payment assistance is not one thing. It comes in three distinct structures, and each has a different cost profile, eligibility trigger, and repayment obligation. Conflating them causes real application errors, so let’s separate them clearly.
Outright Grant: This is money that does not need to be repaid under any circumstances. The Virginia Housing Down Payment Assistance Grant (more on this shortly) is a grant structure. You receive the funds at closing, they are applied to your down payment, and there is no second lien, no repayment schedule, and no recapture if you sell. Grants typically cover a smaller percentage of the purchase price precisely because they carry no repayment obligation for the issuing agency.
Forgivable Second Mortgage: This is structured as a loan but is forgiven incrementally over a set occupancy period, often five to ten years. If you remain in the home for the full forgiveness period, the balance disappears. If you sell or refinance before the period ends, you repay the outstanding balance on a prorated basis. The forgiveness trigger is continued occupancy, not income or appreciation.
Deferred Second Mortgage: This is a real loan with a real balance. No monthly payments are required during the life of your first mortgage, but the full amount becomes due when you sell the home, refinance, or pay off the first mortgage. It reduces your cash-to-close now and is repaid from your equity later. Buyers who plan to stay long-term often find this structure acceptable, but it does affect your net proceeds at sale.
DPA is also not a seller concession, not a loan modification, and not the same as closing cost assistance. These are separate buckets with separate rules under FHA guidelines. A seller concession reduces what you owe at closing but comes from the seller’s proceeds. Closing cost assistance covers lender fees, title, and prepaid items — not the down payment itself. Using the wrong term on an application, or assuming one program covers both, is a documented source of delay and denial.
Under HUD Handbook 4000.1, Section II.A.4.d, FHA explicitly permits DPA from government entities and HUD-approved nonprofits. The source of funds must be verified and documented. Seller-funded DPA — where the seller or a seller-affiliated entity funds the assistance — has been prohibited since 2008 and remains ineligible regardless of how it is structured.
FHA + DPA: The Most Compatible First Mortgage and Assistance Combination Available
FHA loans dominate the DPA landscape for a simple structural reason: the required down payment is small, predictable, and sized exactly for what DPA programs are designed to cover.
FHA requires a minimum 3.5% down payment for borrowers with a 580 or higher FICO score. On a $350,000 purchase, that’s $12,250. Most state housing finance agency grants and forgivable second mortgages are sized to cover 3% to 5% of the purchase price — which means an FHA buyer using a DPA grant can arrive at the closing table with the down payment fully funded by the assistance program. That’s not a loophole. That’s the intended design.
For 2026, FHA loan limits are set at $541,287 (floor) and $1,249,125 (ceiling) for a 1-unit property, effective for case numbers assigned on or after January 1, 2026, per HUD Mortgagee Letter 2025-23 (source: hud.gov/program_offices/housing/sfh/lender/origination/limits). Most DPA programs cap eligible purchase prices at or below the floor limit, which means buyers in standard-cost markets like the Richmond metro are well within the eligible range for both the FHA loan and the DPA program simultaneously.
Credit score tier is where buyers need to pay careful attention. FHA allows a 580+ FICO for the 3.5% down payment — the tier that makes DPA stacking possible. FHA also permits 500 to 579 FICO with a 10% down payment, but most DPA programs impose their own floor of 620 or higher. This creates a planning gap in the 580 to 619 band: you may qualify for the FHA loan at 3.5% down, but the DPA program that would fund that down payment may require a higher score than you currently have.
This is not a dead end. It is a sequencing issue. A buyer in the 580 to 619 range should understand that the path to DPA eligibility often runs through a short credit-building period, not a larger down payment saved from scratch. The NoTouch Credit Pull process — a soft-pull pre-qualification that does not trigger a hard inquiry — lets you establish your current FICO tier and map the gap before any formal application is submitted, preserving the score that DPA programs use for their eligibility cutoffs.
Conventional loans, by contrast, require a minimum 3% down but impose stricter credit and debt-to-income requirements that many first-time buyers cannot meet without significant preparation. VA and USDA loans offer zero-down options but require military service or rural property eligibility, respectively. FHA’s combination of accessible credit standards and a predictable 3.5% gap is why housing policy researchers and HUD counseling agencies consistently identify FHA as the most DPA-compatible first mortgage structure.
Virginia DPA Programs: Richmond Metro and Statewide
Virginia buyers have access to one of the more robust state-level DPA ecosystems in the country, anchored by Virginia Housing (formerly VHDA) and supplemented by locality-level programs in the Richmond metro counties.
Virginia Housing Down Payment Assistance Grant: Virginia Housing administers a Down Payment Assistance Grant that covers up to 2.5% of the purchase price with no repayment required. It is paired with a Virginia Housing first mortgage, which is FHA-compatible, meaning you can use an FHA loan as your first mortgage and layer the Virginia Housing grant on top. Income and purchase price limits apply by locality and change periodically. Verify current limits directly at virginiahousing.com before applying, as figures published elsewhere may be outdated. The grant structure — no repayment, no second lien — makes this one of the most buyer-favorable DPA instruments in the state.
County-Level Programs: Henrico, Chesterfield, and Hanover counties have each administered homebuyer assistance programs at various points, but funding availability and program terms change with annual budget cycles. Before relying on any county-level program, contact the housing office for that county directly to confirm current availability and funding status. Do not assume a program listed online is currently funded.
Now let’s look at what the numbers actually mean for a buyer in this market.
Worked Example: $350,000 FHA Purchase in Henrico County
Purchase price: $350,000. Down payment at 3.5%: $12,250. If a DPA grant covers this amount, the buyer’s cash-to-close shifts dramatically — but the monthly payment structure does not change.
Upfront Mortgage Insurance Premium (UFMIP): 1.75% of the base loan amount. On a $337,750 base loan (purchase price minus down payment), UFMIP is $5,911, typically financed into the loan. This brings the total loan amount to approximately $343,661.
Annual MIP for a 30-year FHA loan with LTV above 95%: 0.55% per year (per HUD Mortgagee Letter 2023-05, effective 3/20/23). On a $343,661 loan balance, that’s approximately $158 per month in the first year, decreasing slightly as the balance amortizes.
Property tax in Henrico County: $0.85 per $100 of assessed value (source: henrico.us/services/real-estate-assessments/). On a $350,000 assessed value, annual property tax is approximately $2,975, or roughly $248 per month in escrow.
Homeowner’s insurance is a market-rate cost that varies by property and coverage level — include a quote from your insurer rather than estimating.
The DPA grant changes one number: how much cash you bring to closing. The monthly payment — principal, interest, MIP, taxes, and insurance — is identical whether the down payment came from your savings account or a DPA grant. That’s the correct framing. DPA solves the cash-to-close barrier; it does not reduce your ongoing housing cost.
How to Find DPA Programs Wherever You Are
The search for DPA programs does not require a Google rabbit hole. There is a verified, authoritative lookup path that works in every state.
Step One: HUD’s State HFA Directory. Every state has a Housing Finance Agency that administers at least one DPA program. HUD maintains a state-by-state directory at hud.gov/states. This is your no-fail starting point regardless of geography. Whether you are in Virginia, Florida, Tennessee, Georgia, or the DC metro area, the state HFA is the primary administrator of the largest and most consistently funded DPA programs available.
Step Two: HUD-Approved Housing Counseling Agencies. Many DPA programs require completion of a HUD-approved homebuyer education course before the application is accepted. This is not optional paperwork — it is a strategic step that unlocks additional program tiers and ensures you are screened for every program you qualify for, not just the most visible one. Find a HUD-approved counseling agency near you at hud.gov/program_offices/housing/sfh/hcc/hcs. Counseling is typically free or low-cost and includes DPA eligibility screening as part of the session.
What to bring to your DPA eligibility screening:
Income documentation: W-2s, tax returns, and pay stubs for all household members — not just the borrower. Income limits are household-level (more on this in the next section).
Credit profile summary: A soft-pull credit summary showing your current FICO score and major tradeline history. You do not need a hard-pull report for this screening.
Target purchase price range: DPA programs have purchase price caps. Knowing your target range lets the counselor confirm you are within the eligible window before you invest time in a full application.
First-time buyer status documentation: Tax returns from the past three years can confirm you did not own a primary residence during that period — the standard definition used by HUD and most state HFAs.
DPA Eligibility Rules That Catch Buyers Off Guard
The rules that disqualify buyers are rarely the obvious ones. Here are the three that create the most surprises.
The First-Time Buyer Definition Is Broader Than You Think: HUD and most state HFAs define “first-time buyer” as anyone who has not owned a primary residence in the past three years. This means a divorced individual who left a jointly owned home three or more years ago qualifies. A former owner who sold and rented for three or more years qualifies. A relocating buyer who sold their home in another state and has been renting qualifies. Many buyers disqualify themselves mentally before they ever apply, assuming past homeownership is a permanent bar. It is not.
Income Limits Are Household Limits, Not Borrower Limits: This is the most common source of DPA application errors. The income cap applies to all adults living in the home — including a non-borrowing spouse or partner — not just the person on the mortgage application. A household where one partner earns $60,000 and the other earns $55,000 may exceed the area median income threshold even if only the lower-earning partner is on the loan. The AMI cap is designed to target the program toward buyers who genuinely need it, and it is calculated at the household level by design. Know your combined household income before assuming you qualify.
Recapture Provisions on Forgivable Loans: Many federally subsidized DPA programs include a recapture provision under IRC Section 143(m), governed by IRS Publication 523. If you sell the home within nine years of purchase at a gain, and your income has increased above a threshold since the time of purchase, a portion of the subsidy may be subject to federal income tax. This is not a lien on the property — it does not affect your ability to sell. It is a potential tax liability that is calculated at the time of sale. Buyers must receive a recapture notice at closing. Read it. Keep it with your tax records. The recapture amount is often zero or minimal, but buyers who are unaware of it can be caught off guard at tax time after a sale.
Why DPA Stacking Requires a Broker, Not a Bank
Here’s where the structure of who you work with matters more than most buyers realize.
Retail lenders — banks and direct lenders — are approved for a subset of DPA programs in their state. Their loan officers can only offer the programs their institution has been approved to participate in. If the best DPA program for your situation requires a different wholesale lender as the first mortgage provider, a retail loan officer cannot access it. They will offer you what they have, not what fits you best.
A mortgage broker operates differently. With access to 500+ wholesale lenders, a broker can identify the DPA program that fits your income, credit profile, and purchase price first, then select the compatible FHA first mortgage from the wholesale lender shelf — rather than working backward from a single lender’s approved list. The program drives the lender selection, not the other way around.
The NoTouch Credit Pull advantage is particularly relevant in DPA shopping. Buyers who approach multiple lenders directly to compare DPA options risk triggering multiple hard inquiries, each of which can reduce the FICO score that DPA programs use to determine eligibility. A broker using soft-pull pre-qualification can run the full DPA eligibility analysis across multiple program options before any hard inquiry is initiated. That means your credit score stays intact through the comparison process — right up until you submit the application for the program you’ve chosen.
Nationally, Rocket Mortgage and Movement Mortgage participate in select DPA programs, but their retail channels limit which state HFA programs they can access. A local FHA-specialist broker like Coast2Coast Mortgage LLC (NMLS #376205) can access the full Virginia Housing program shelf plus county-level programs that national retail channels typically do not offer. That breadth of access is the practical difference between finding the right program and settling for the available one.
Your DPA + FHA Action Checklist
DPA programs are funded annually — by state legislatures, HUD HOME allocations, and Community Development Block Grants — and they run out. Buyers who wait until they find a property to investigate DPA often discover the program is unfunded for the year. The correct sequence is to qualify for DPA before you start house-hunting, not after you find the house.
Here is the step sequence that works:
1. Verify your first-time buyer status under the three-year rule. Pull your tax returns from the past three years and confirm you did not own a primary residence during that period.
2. Run a soft-pull pre-qualification to establish your current FICO tier. Know whether you are at 580+, 620+, or still building toward eligibility. This is the NoTouch Credit Pull — no hard inquiry, no score impact.
3. Contact your state HFA or a HUD-approved housing counselor for a DPA eligibility screening. Bring your income documentation, credit summary, and target purchase price range.
4. Get FHA pre-approval with the DPA source documented. Your mortgage broker should confirm that the DPA grant or second mortgage has been verified as an eligible source under HUD Handbook 4000.1, Section II.A.4.d.
5. Submit your mortgage application with the DPA second mortgage (if applicable) included as part of the full financing package. Your broker coordinates the first and second mortgage simultaneously so there are no timing gaps at closing.
Timing matters. Programs that open in January can be fully subscribed by spring in high-demand markets. Pre-qualifying for DPA before you are under contract is not just good planning — it is often the difference between using the program and missing it entirely.
To start the process with a no-hard-pull FHA and DPA eligibility review, contact Duane Buziak at Coast2Coast Mortgage LLC. As a broker — not a lender or banker — Duane accesses the full wholesale lender shelf including Virginia Housing’s complete program range and county-level programs that retail channels often cannot reach. Reach the team at 804-212-8663 or at 4860 Cox Rd, Glen Allen, VA 23060.
The Bottom Line on FHA and Down Payment Assistance
FHA is the most DPA-compatible first mortgage available. Its 3.5% minimum down payment creates a predictable, small gap that state housing finance agencies, counties, and HUD-approved nonprofits have specifically sized their programs to fill. For qualified buyers, the combination of an FHA first mortgage and a properly sourced DPA grant or forgivable second mortgage can eliminate the cash-to-close barrier entirely — not by bending the rules, but by using the system exactly as it was designed.
The key is working with someone who has access to the full program shelf, not just the programs a single retail lender happens to be approved for. Broker access to 500+ wholesale lenders means the DPA program is selected first, and the compatible FHA mortgage follows. That’s the Dare to Compare difference.
If you are ready to find out which DPA programs you qualify for and what your actual cash-to-close looks like with FHA, start with a soft-pull pre-qualification that protects your credit score through the entire process. Schedule your free consultation today and get a clear picture of your FHA + DPA options before you start house-hunting.
