Conventional Loan Grants and Assistance Programs Available

Fannie Mae and Freddie Mac, the government-sponsored enterprises (GSEs) that back the majority of conventional mortgages in the United States, have created specialized loan programs specifically designed to work with down payment assistance grants, gifts, and other third-party funding sources. These programs are often the gateway through which state and local down payment assistance programs flow to borrowers.

Fannie Mae HomeReady®

HomeReady is a conventional community lending mortgage that offers down payments as low as 3% with flexibility to fund down payment and closing costs from multiple sources, including gifts, eligible grants, and Community Seconds®.

Income Limits: To qualify, your income must not exceed 80% of your area's median income (AMI). For example, if your area has a median income of $100,000, you must make $80,000 or less.

Check Your AMI Eligibility: Use Fannie Mae's Area Median Income Lookup Tool to determine income eligibility for your specific property address.

Borrower Contribution Requirements for One-Unit Primary Residences: For one-unit primary residences, gifts, grants, and Community Seconds® can be used as a source of funds for down payment and closing costs, with no minimum contribution required from the borrower's own funds. This means you can fund 100% of your down payment and closing costs from gifts and grants at any LTV ratio.

Borrower Contribution Requirements for Multi-Unit Properties: For two- to four-unit primary residences with LTV greater than 80%, a 3% minimum contribution from the borrower's own funds is required unless there is a grant.

Very Low-Income Purchase (VLIP) Credit: Fannie Mae offers a $2,500 lender credit specifically for first-time homebuyers with qualifying income of 50% or less of the area median income (AMI). This credit must be applied toward reimbursement of funds disbursed by the lender for down payment or closing costs (which can include mortgage insurance premiums). The credit is available for whole loans purchased through February 28, 2027, and for loans delivered into MBS with issue dates through February 1, 2027.

Mortgage Insurance Benefits: HomeReady offers lower than standard mortgage insurance (MI) coverage requirements for loans with LTV ratios greater than 90% up to 97%. Additionally, monthly MI payments are cancellable upon borrower request when the loan balance drops below 80% LTV, or automatically when it drops below 78% LTV.

Education Requirement: For HomeReady purchase loans when all occupying borrowers are first-time homebuyers, at least one borrower must complete a homeownership education course from a qualified provider, regardless of LTV. Fannie Mae's free HomeView® course satisfies this requirement.

Freddie Mac Home Possible®

Home Possible is a low down payment mortgage solution offering 3% down payment options with flexible sources of funding for down payment and closing costs.

Income Limits: Home Possible eligibility requires that income must be less than or equal to 80% of the AMI for the location of the mortgaged premises.

Check Your AMI Eligibility: Use Freddie Mac's Home Possible Income and Property Eligibility Tool to determine if you qualify based on your property address and income.

Down Payment Sources: Down payment can come from a variety of sources, including family, employer-assistance programs, secondary financing, and sweat equity.

Mortgage Insurance: Mortgage insurance (MI) on 1-unit properties can be cancelled after loan balance drops below 80% of the home's appraised value and cancellation criteria are met. This is a significant advantage over FHA loans, where mortgage insurance may be required for the life of the loan.

$2,500 Credit for Very Low-Income Borrowers: Freddie Mac makes a $2,500 credit accessible through Home Possible for borrowers earning 50% or less of the area median income who are purchasing a home. This can be used for down payment, closing costs, escrow, and mortgage insurance.

HFA Preferred™ and HFA Advantage™

Beyond HomeReady and Home Possible, Fannie Mae and Freddie Mac have created specialized products for state and local housing finance agencies (HFAs). HFA Preferred is Fannie Mae's low down payment conventional mortgage product that participating HFAs can use to serve low- to moderate-income borrowers exclusively through their lender partners.

HFA Preferred is a conventional mortgage with a 3% minimum down payment backed by Fannie Mae, and can be used for two-to-four-unit family homes as long as the borrower occupies one unit, plus it can be used for manufactured homes.

Partnership Structure: Through partnerships with nearly 70 state and local housing finance agencies, Fannie Mae advances affordable homeownership by providing a personalized, mission-driven approach. HFAs then partner with private lenders to originate and fund loans, and borrowers typically gain access to HFA-specific down payment assistance programs.

Down Payment Assistance: Once someone is approved for an HFA loan, they can typically get a grant, forgivable loan or second mortgage to cover the down payment and closing costs, allowing them to put nothing down upfront.

Freddie Mac's Counterpart: Freddie Mac offers a similar program called HFA Advantage™, which operates on the same principles as HFA Preferred but is backed by Freddie Mac instead.

Pennsylvania Housing Finance Agency (PHFA) Down Payment Assistance

For Pennsylvania homebuyers, the Pennsylvania Housing Finance Agency offers two primary down payment assistance programs that can be paired with conventional mortgages, HomeReady, and other loan products.

Keystone Advantage Assistance Loan Program

This program provides a second mortgage loan to help cover down payment and closing costs. Key features include:

• Up to $6,000 or 4% of the purchase price (whichever is less)
• 0% interest rate—you pay back only what you borrowed
• 10-year repayment term
• Typically requires the borrower to contribute at least $1,000 from their own funds toward the down payment
• Available to first-time homebuyers with income at or below specific thresholds (varies by county)

Keystone Forgivable in Ten Years (K-FIT) Loan Program

This program offers a forgivable second mortgage loan with more generous assistance. Key features include:

• Up to 5% of the purchase price or appraised value with no maximum dollar cap
• Forgivable loan—meaning the balance decreases each year you keep the home
• 10% of the balance is forgiven each year for 10 years
• If you remain in the home for the full 10-year period and meet program requirements, the entire loan is forgiven with no repayment obligation
• Available to first-time homebuyers with qualifying income

How to Apply: Both PHFA programs must be accessed through an approved PHFA lender. You will apply for these assistance loans when you apply for your first mortgage (whether that's a Keystone Home Loan, HFA Preferred, or another conventional product). For more information and to find an approved PHFA lender, visit PHFA's Homebuyer Assistance page or call 1-855-827-3466.

State and local down payment assistance programs—whether offered by housing finance agencies, nonprofits, or government entities—are specifically designed to work with HomeReady, Home Possible, HFA Preferred, and HFA Advantage loans. Because these GSE programs explicitly accept gifts, grants, and secondary financing, they serve as the vehicle of choice for state and local assistance initiatives.

For borrowers, this means that if you qualify for one of these programs based on income and other factors, you gain access not only to a low-down-payment conventional loan but also to a network of state and local assistance programs that can help cover your down payment and closing costs. This combination often makes conventional financing more accessible and affordable than FHA loans, particularly for borrowers with good credit who meet income eligibility requirements.