• HUD offers down payment assistance grants and loans.house with picket fence image by Michael Shake from Fotolia.com
  
  The U.S. Department of Housing and Urban Development, or HUD, offers a federally subsidized home down payment assistance program called the American Dream Down Payment Initiative or ADDI. HUD also offers down payment assistance programs through state and local housing authorities. Lender participation in HUD down payment assistance programs is voluntary. Before applying for a down payment assistance grant or loan through HUD, you should always check with your lender to be sure they participate in such programs.
  
  

ADDI

• Down payment assistance through HUD's ADDI program is only available to you if you plan to obtain a Federal Housing Administration or FHA loan. To qualify for this program, you must be a first-time home buyer. HUD limits the total amount of the down payment grant to six percent or less of the purchase price of the home. Finally, your income cannot be more than 80 percent of the local median income of the area in which you plan to buy a house.
  
  

Housing Authorities

• Every year, HUD contributes money to state and local housing authorities specifically for home down payment assistance programs. The qualifications for down payment assistance for each state and local housing authority vary. In general, you have to meet certain income and residency requirements. State and local housing authorities also have limits on the purchase price of the home. Most states have programs that allow for both down payment grants and interest-free down payment loans.
  
  

Covering Other Costs

• HUD does not limit the use of down payment assistance grants and loans strictly to the down payment for the home. You can use the money toward a number of other costs involved with buying a home, including the costs involved in processing and closing your mortgage loan. Examples of these costs include premium payments for up-front mortgage insurance, taxes, building inspections, title search fees, origination fees associated with the loan and appraisal costs.