Building enough funds to buy a home could take a long time, and it's hard work. Saving enough money for a down payment doesn't have to be what's holding you back from buying a home. Finding down payment assistance is the first step in financing your new home. You just have to find a lender that will work with you and provide guidance on where to look for down payment assistance (DPA). Some new homeowners put little-to-no money down on their homes. Every situation is different, so here are some guiding principles on finding down payment assistance in your area. 

• Department of Housing and Urban Development (HUD) 

• Federal Housing Administration (FHA)

It's Like Applying for a Scholarship

If you've applied for a college or trade school scholarship, then you know that nearly every scholarship has different qualifications. I once came across a scholarship when I was applying for college that the recipient had to be born on a specific month. While I don't believe state and local down payment funds are this specific, I can say that none of them are built the same. Different assistance programs are available based on income, geographic location, and the last time you've owned a home. Some plans are for low-to-moderate-income buyers, and others are built to assist minority groups. Prospective home buyers have to research and see which category they fall into to find the right DPA program.

DPA for First Time Buyers

It can be difficult for a first-time buyer to enter the home buying world. Financing companies and state and federal governments have tried to make it more accessible for new homebuyers to take out a loan. If you've been renting for a long time, you won't have a history of mortgage payments for lenders to evaluate, making it more difficult to approve a loan amount. Different organizations have provided down payment assistance specifically for first-time buyers to bridge the gap, so they don't have to settle for a huge interest loan. 

It may also be more difficult for some buyers to save a ton of money for a down payment. Instead, some lenders will offer low-to-no down payment mortgages to allow new buyers the chance to enjoy homeownership. Your best bet for ensuring a reasonable rate on your loan is to build up your credit. If you've taken out other loans for things like cars, student loans, or personal loans, you likely already have a substantial credit history. Continue to pay off those loans, and don't take out any more loans until you've spoken with a trusted bank or lender. 

Once you're sure your credit is in good standing, it's time to evaluate your expenses against your income. Understanding how much you can afford for a mortgage depends on how much money you make per month vs. how much outstanding debt and expenses you have. Once you know your debt-to-income (DTI), you'll have a better idea of how much you can afford. Finally, start saving for a small down payment. Lenders can help you out, but the likelihood you get a 0% down loan is small. Saving up some cash is your best bet to ensuring you get the loan. 

Common Mortgage Qualifications

We wanted to throw in some qualifications for standard mortgage options so you can compare your finances. If you're somewhere close to these benchmarks, you're in an excellent spot to be able to take out some type of mortgage. Even better, if you meet these qualifications and you're a first-time buyer, you should have some good options when choosing to buy your first home. 

Conventional Mortgage

• Usually requires a minimum credit score of 620
• 5-percent down payment, some programs allow 3-percent
• Debt-to-income around 50% or less
• Usually requires Private Mortgage Insurance until you reach 20% equity. 

FHA Loan (Government-backed: Federal Housing Administration)

• Usually requires credit score to be a minimum of 580
• 3.5% minimum down payment
• Additional fee: mortgage payment premium for the life of the loan. 

Veterans Affairs (VA) Loan

• Only available to veterans or their spouses
• 0% down payment
• No Private Mortgage Insurance required

If you qualify for any of these options, then you should have a good idea of how much you'll need to save for the down payment. If you don't meet the requirements, you can still search for other down payment assistance options in your area. 

Talk to a Trusted Lender

The best way to get sound financial advice is to speak with a mortgage professional. They can explain your financing options and help you make a plan that fits your needs. You will also have a better idea of the types of down payment assistance options in your area and can tell you which ones you should pursue. 

Before you start your home search, you should talk to a lender about pre-approval. Having the peace of mind going into your home search is a great feeling. A pre-approval will tell you how much you're likely approved to borrow, and it will guide your home search. Besides, you don't want to waste your time touring homes that don't fit your budget. Also, you'll be ready to make an offer when the right house does come around. Once you're ready to get serious, talk to a loan officer about pre-approval so you can start your home search.