There are down payment assistance programs available for those who want to own a home but cannot afford the down payment or closing costs. Most down payment assistance programs are used in conjunction with FHA loans.

In addition to government programs, there are many lenders who will allow a gift to be used as all or part of the down payment. The gift must be from a relative and it must be a gift, not a loan. The person providing the gift will be required to sign a letter indicating the funds are a gift and no repayment is expected. Consult with your mortgage professional to determine how much gift money you can use.

When using a grant for down payment assistance, check to see if you are required to live in the property for a specific amount of time. If you are then selling early could result in you having to pay the grant money back.

How the down payment assistance programs generally work is that the program operators provide the down payment for the qualified home buyer and then the seller reimburses the program for the amount of the down payment that was provided. In essence, the seller gave a 3 per cent (in the case of an FHA loan) discount off the purchase price but the selling price was listed as the full price and the discount was used for down payment assistance.

A first time home buyer is defined as an individual, who has not had an ownership interest in a home within the last three years. If you fit this definition, you might be eligible for a home buyer grant, that can be used toward the partial or full down payment.

In some of the local or state government down payment assistance programs there involves what is known as an equity share or "silent second mortgage" on the title. In this arrangement the purchaser agrees to share the future equity from market appreciation with the government entity. Such "silent seconds" can often cause roadblocks when the property owners go to refinance their first mortgages.

Each State also has its own Government run programs available on the county and city level that can help home buyers get into a home with grants and down payment assistance.