Key Takeaways
- Closing costs typically run 2% to 5% of the purchase price, according to Freddie Mac, and closing cost assistance can cover some or all of them.
- Grants, loans, and credits from state, local, federal, nonprofit and lender programs offer several ways to ease closing cost burdens.
- Most programs set income, credit score and property limits and may require homebuyer education. Meeting them does not guarantee assistance, and funding can run out.
Verify your home buying eligibility. Start here
Closing cost assistance is money from a state or local housing agency, nonprofit, lender or seller that covers some of the fees due when you close on a home. It can come as a grant, a forgivable or deferred loan, or a credit at closing.
Closing costs typically run 2% to 5% of the purchase price, according to Freddie Mac. On a $350,000 home, that is about $7,000 to $17,500 in closing costs, separate from your down payment. The cash you still need at closing depends on assistance, credits and amounts already paid.
If you qualify, assistance lets you keep more of your savings for moving costs, repairs and reserves.
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What is closing cost assistance?
Closing cost assistance is financial help provided to home buyers to cover the expenses associated with closing a real estate transaction. These funds can come in the form of a closing cost assistance (CCA) grant, which does not need to be repaid, or a special assistance loan, which may have favorable terms such as no interest or deferred payments.
Buyers are typically responsible for paying various closing costs when purchasing a home, which can include fees such as appraisal, attorney, title insurance, loan origination, and other expenses related to the home purchase.
Closing cost assistance programs are intended to help buyers reduce their financial burden by providing funds or grants to offset some or all of these closing costs. The specifics and availability of such programs may differ depending on the location and program.
Types of closing costs
Closing costs typically total 2% to 5% of the purchase price, according to Freddie Mac. Your Loan Estimate lists the fees for your loan. Common ones include:
- Loan origination fee: Your lender charges this fee to process and underwrite the new loan. It may be a flat fee or a percentage of the loan amount.
- Appraisal fee: An appraisal is usually required to confirm the home’s market value.
- Title search and insurance fees: A title search checks for ownership and lien issues. Lender’s title insurance protects the lender against covered title claims; a separate owner’s policy can protect your investment. Owner’s coverage is generally optional. Costs vary.
- Inspection fees: These fees cover the cost of home inspections, which can identify potential issues with the property.
- Escrow deposit: Your lender may collect an initial deposit toward property taxes and homeowners insurance. Federal rules cap the extra cushion at one-sixth of the year’s estimated escrow payments, or about two months.
- Recording fees: Your city or county charges these fees to record the deed and mortgage.
How does closing cost assistance work?
Generally, closing cost assistance is not a standalone program. It’s included as part of a down payment assistance (DPA) program. DPAs typically offer money that can be put toward your down payment or closing costs—whatever will help most with your home purchase.
Regardless, the funds can come to you in one of several ways. Each source offers different types of assistance, each with unique benefits and conditions that can affect your home buying process.
Check your mortgage eligibility. Start here
Closing cost assistance grants
Closing cost grants do not need to be repaid. Nonprofits and state and local programs offer them, often to first-time buyers or buyers with low to moderate incomes. Other programs offer forgivable loans: some or all of the balance is canceled after you meet the program’s requirements, but repayment may be required if you do not. For current options, see these grants for first-time home buyers.
Loan-based assistance options
Loan-based options are another common form of closing cost assistance, providing first-time home buyers with various ways to manage their upfront expenses.
Forgivable loans
A forgivable loan is a type of loan that does not have to be repaid if the homeowner remains in the house for a set period, effectively turning it into a grant. This option encourages homeowners to maintain their property as their primary residence for the duration of the term. It supports community stability and homeowner commitment.
No- or low-interest loans
Offered often as a second mortgage loan, this type of loan aids in covering closing costs and is repaid alongside the primary, or first mortgage. It’s designed with no or low interest to lighten the financial burden on the home buyer. State or local housing finance agencies usually provide these loans. They’re an attractive option for reducing the immediate out-of-pocket expenses involved in purchasing a home.
Deferred-payment loans
Some closing cost assistance programs offer deferred-payment loans, which do not require monthly payments. Instead, the loan is repaid when the home is sold, refinanced, or when the first mortgage is fully paid off.
This can provide immediate relief to homebuyers and allow them to focus on their mortgage payments without the added burden of additional loan repayments.
Matched savings programs
Matched savings programs add matching funds to money you save toward a home purchase. Terms vary by program, so confirm whether the match must be repaid and what costs it can cover before you enroll.
Lender credits
Participating lenders might provide lender credits to help with closing costs in exchange for a slightly higher interest rate on your home loan. This arrangement can minimize the amount needed at closing but results in a higher overall cost due to the increased interest over the life of the loan.
Seller contributions
You can negotiate for the seller to pay part of your closing costs, which lowers the cash you need at closing. Loan programs set different rules for seller-paid costs and concessions; see the limits by loan type under ‘Ask the seller to pay closing costs’ below.
Where to find closing cost assistance grants
Start with your state housing finance agency (HFA), which runs most statewide down payment and closing cost programs and can refer you to participating lenders. USA.gov points buyers to the National Council of State Housing Agencies’ HFA directory. A HUD-approved housing counselor can also point you to local programs, often at little or no cost.
Verify your home buying eligibility. Start here
To find out more about programs for which you might be eligible, you can also read through the following guides:
Keep in mind that qualifying requirements for closing cost and down payment assistance grants vary by program. Income caps and maximum loan amounts are common.
But you don’t always have to be a first-time home buyer to get financial aid. Many programs are available to repeat buyers or former homeowners who haven’t owned property in the last three years.
Types of closing cost assistance programs
Closing cost help comes from four main places: federal loan rules, state and local agencies, nonprofits and private lenders, and the seller or lender at closing.
Verify your home buying eligibility. Start here
Many programs target buyers with low to moderate incomes, and some are open to repeat buyers. Check each program’s income, credit and property rules before you apply.
Each type of closing cost assistance has its own set of guidelines and requirements. The funds can typically be used for both down payments and closing costs, giving you more flexibility in how you allocate your savings.
Federal assistance programs
Federal support includes government-backed mortgages and funding for state and local homebuyer assistance. FHA, VA and USDA loans allow certain seller-paid closing costs, subject to program rules. Check your state or local housing agency for assistance, and be wary of unsolicited promises of ‘free money.’
State and local assistance programs
Most closing cost help comes from state housing finance agencies (HFAs) and city or county programs, usually as part of down payment assistance. It may be a grant, a forgivable loan or a deferred loan, and many programs require you to use the agency’s own first mortgage. These state programs show how terms differ:
| Program | Assistance | Repayment | Published requirements |
| CalHFA MyHome Assistance Program (California) | Up to 3.5% of the purchase price or appraised value, whichever is less, with a CalHFA government (FHA) loan; up to 3% with a conventional loan | Deferred-payment junior loan | First-time buyers; income limits; homebuyer education |
| Florida Housing FL Assist (Florida) | Up to $10,000 | 0% deferred second mortgage, not forgivable; due in full upon sale, transfer, refinancing, payoff of the first mortgage or cessation of occupancy. | 640 minimum credit score; income and purchase price limits; homebuyer education; first-time buyers. Must be paired with a Florida Housing first mortgage. |
| Ohio Housing Finance Agency Down Payment Assistance (Ohio) | 3% of the purchase price with a conventional loan or 3.5% with an FHA, VA or USDA loan | Forgiven after seven years; repay in full if you sell sooner | 640 credit score for conventional, USDA and VA loans; 650 for FHA; income and purchase price limits; homebuyer education |
Program terms as of October 2026. Funding and rules change often, so confirm current terms with the agency. Meeting a program’s minimum credit score does not guarantee approval; income, property and other underwriting requirements apply.
Buyer Tip: Apply Early, Funds Run Out
Many state and local programs operate on a first-come, first-served basis. Starting your application early in your home search increases your chance of securing limited funds.
Nonprofit and private assistance programs
Private lenders and nonprofit organizations also provide closing cost assistance grants and programs. These can have a wide range of eligibility requirements and types of aid offered. Some might concentrate on helping particular communities, like veterans or single parents.
Seller concessions or lender credits
Lender-specific programs can also offer help with closing costs. These might include lender credits in exchange for a higher mortgage interest rate. Additionally, seller concessions can further reduce your burden by having the seller pay a portion of the buyer’s closing costs directly.
How to qualify for closing cost assistance
To qualify for closing cost assistance, you typically need to meet the program’s income limit, credit score minimum, and property and occupancy rules, and you may need to complete a homebuyer education course. Some programs require first-time buyer status; others do not.
Verify your home buying eligibility. Start here
Because there are so many closing cost grant programs available through state and local housing commissions, eligibility requirements can vary. But there are some general guidelines to remember.
Income limits
Most programs cap household income, often as a percentage of the area median income (AMI) for your county. For example, Fannie Mae’s HomeReady loan limits qualifying income to 80% of AMI, according to the Fannie Mae Selling Guide. Programs differ in whether they count household income or only qualifying borrower income. Limits vary by program, so check the published figure for your area.
Minimum credit score requirements
Many programs set a minimum credit score, and the figure varies by program and lender. For example, Florida Housing lists a 640 minimum for its homebuyer loan program, and the Ohio Housing Finance Agency requires 640 for conventional, USDA and VA loans and 650 for FHA loans. A higher score may also help you get better loan terms, but your loan-to-value ratio, loan program and lender also affect your terms.
Meeting the minimum credit score does not guarantee approval; income, property and other underwriting requirements apply.
Tip: Check your credit reports before you apply
Errors on your credit reports can lower your score. If you dispute an error, the credit reporting company generally has 30 days to investigate, according to the CFPB. Some investigations may take up to 45 days.
Property requirements
Usually, the property must be a single-family home used as your primary residence. There may also be purchase price limits. This ensures the program benefits individuals and families seeking a home for personal occupancy, rather than investors. Some programs may also support the purchase of condominiums or townhomes under specific conditions.
Loan type
Some organizations offer specialized mortgage loan programs to be used alongside closing cost assistance and down payment grants. Compatibility varies, with some programs accommodating a wide range of loan types, from conventional loans to government-backed FHA, VA, and USDA loans. This flexibility allows applicants to choose the best loan product for their situation.
Homebuyer status
Some programs are open to repeat buyers; others are for first-time home buyers only. Fannie Mae generally considers you a first-time homebuyer if you are buying a home to live in and have had no ownership interest in residential property during the preceding three years. Exceptions apply to certain single parents and displaced homemakers. Many assistance programs use a similar three-year test, but check the program’s definition.
Homebuyer education
Many programs require a homebuyer education course before closing. CalHFA, for example, requires a certificate from an approved course, and Fannie Mae’s HomeReady requires homeownership education when all occupying borrowers are first-time buyers. Courses are offered online and in person, and some charge a fee.
U.S. residency
Citizenship and residency requirements vary by the assistance program and its accompanying mortgage. FHA removed its general non-permanent-resident eligibility category for case numbers assigned on or after May 25, 2025, while retaining eligibility for qualifying citizens of the Federated States of Micronesia, the Republic of the Marshall Islands and the Republic of Palau. Fannie Mae permits eligible lawful permanent and non-permanent residents. Check both the assistance program’s and lender’s requirements.
Documentation
To qualify for closing cost assistance, you’ll need to provide various documents. This typically includes:
- Tax returns
- W-2s, pay stubs, or other proof of income
- Bank statements
- Proof of U.S. residency
If you’re applying for a program that requires you to be a first-time home buyer, you may also need to provide proof that you haven’t owned a home in the past three years.
Tips to improve your chances of qualifying for closing cost assistance
- Boost your credit: Check your credit report, fix errors, and make on-time payments to meet minimum score requirements.
- Get pre-approved: A mortgage pre-approval shows programs you’re a qualified, serious buyer.
- Save what you can: Even small savings demonstrate financial stability and may be required by some programs.
- Apply locally: State and local programs often have easier qualifications and added benefits.
- Talk to a housing counselor: HUD-approved counselors can help you navigate requirements and strengthen your application.
- Keep finances steady: Avoid new debts or big purchases while applying.
Pros and cons of closing cost assistance
The main benefit is less cash due at closing. The main drawbacks are program conditions, such as living in the home for a set period, repaying a deferred loan when you sell or refinance, or accepting a higher rate or price in exchange for lender or seller credits.
Verify your home buying eligibility. Start here
Benefits of closing cost assistance
One of the primary benefits of closing cost assistance is the financial relief it provides. By reducing the upfront costs of buying a home, these programs can make homeownership more accessible, especially for first-time or low-income buyers.
Additionally, they can enable buyers to maintain more savings for emergencies, home repairs, or to invest in home improvements.
Drawbacks of closing cost assistance
On the downside, many assistance programs come with conditions. For instance, some programs may require you to live in the home for a certain period of time or offer the assistance as a loan that gets repaid when the home is sold.
Also, some forms of assistance, like seller concessions or lender credits, might result in a higher purchase price or interest rate.
Before you apply, read the program’s repayment, occupancy and resale terms.
How to apply for closing cost assistance
You usually apply for closing cost assistance through a participating lender at the same time you apply for your mortgage, because many programs are paired with the agency’s own first mortgage.
Check your mortgage eligibility. Start here
Step-by-step application process
- Research: Start by researching first-time home buyer closing cost assistance programs available in your area. This includes federal, state, local, and nonprofit programs. Determine if you meet the qualifying requirements, which often include income limits and the property being owner-occupied.
- Gather your documents: Prepare all necessary documentation, such as proof of income, tax returns, bank statements, and other relevant information.
- Submit an application: Apply for the assistance program either online or in person, depending on the program’s requirements. Fill out all required forms accurately, and attach your documents.
- Follow up: After submitting your application, be sure to follow up. The approval process can take some time, but regular check-ins show your continued interest.
When to apply for closing cost assistance
The best time to apply for help with closing costs is as soon as you start thinking about buying a home. It’s best to start early because the process can take a while.
Assistance approval usually runs alongside your mortgage approval. If you’re approved, you’ll find out how much help you’ve been given and if there are any rules or requirements that come with it.
Here are some key points to remember:
- Start early: Begin researching and applying for assistance programs as soon as you decide to buy a home. Many programs have limited funds and operate on a first-come, first-served basis.
- Consider program deadlines: Some closing cost assistance programs have specific application periods or deadlines. Make sure you’re aware of these and apply accordingly.
- Coordinate with your mortgage application: If you’re wondering how to get money for closing costs, remember that many assistance programs need to be coordinated with your primary mortgage application. Apply for assistance around the same time you start the mortgage process.
Other ways to reduce closing costs
Closing cost assistance doesn’t have to come exclusively from a housing finance agency or local program. There are other ways to come up with the cash, too.
Check your mortgage eligibility. Start here
1. Ask the seller to pay closing costs
“It’s common for the home seller to pay for some or all of the buyer’s closing costs. This is most commonly seen by working the request into the buying offer,” says Reggie Graham, branch manager for Thrive Mortgage.
“At least request that the seller cover some of the closing costs, as it will allow the buyer to have more cash on hand for additional expenses that come with moving into a new home,” he recommends. “Work closely with your real estate agent, who can negotiate this into your purchase offer.”
Danielle O’Brien, broker and owner of Parkway Real Estate, explains how this approach works.
“Essentially, you’re borrowing more from the bank than you are actually paying the seller for the home. The seller is technically receiving this money. But they’re transferring it to the buyer to help with closing costs,” says O’Brien. “However, I usually don’t advise my clients to write this into an offer unless it’s necessary. That’s because it can be seen as a less clean offer that could turn off the seller.”
Rules for seller and other interested-party contributions vary by loan type and expense. For FHA and Fannie Mae loans, amounts above the applicable financing-contribution limit require an adjustment to the property value used to calculate the maximum loan. Learn how to negotiate seller concessions.
| Loan type | How much the seller and other interested parties can pay | Source |
| FHA | Up to 6% of the sales price toward closing costs, prepaid items and other eligible costs | HUD Handbook 4000.1 |
| VA | The seller may pay your closing costs; other concessions, such as paying your VA funding fee or debts, are capped at 4% of the home’s reasonable value | VA |
| USDA guaranteed purchase loans | Generally up to 6% of the sales price toward eligible costs | USDA Rural Development |
| Conventional (Fannie Mae) | For a principal residence or second home, generally 3% when LTV/CLTV exceeds 90%, 6% at 75.01% to 90%, and 9% at 75% or less; investment properties: 2%. These percentages apply to the lower of the sales price or appraised value. Financing contributions cannot exceed eligible closing costs. | Fannie Mae Selling Guide |
2. Use a cash gift from a loved one
Alternatively, you can ask for closing cost help from a relative, friend, or loved one.
Most major home buying programs, including FHA and conventional loans, allow you to use gifted funds for the down payment and closing costs.
VA loans and USDA loans do not require a down payment, but you could still use gift money for your closing costs.
The one thing you must do is make sure the gift funds are properly documented in order for them to be accepted by your mortgage lender.
Check your home buying options. Start here
3. Have the lender pay your closing costs
“Some lenders will also let you roll your closing costs into the loan by paying a higher interest rate,” notes Graham. This is known as a lender credit.
“But while you’ll pay less money upfront with this strategy, you’ll end up paying more in the long run through compounded interest,” he cautions.
Whatever approach you explore, weigh the pros and cons carefully.
4. Choose a less expensive home
Finding homes with lower sales prices can also make closing costs more manageable.
Many closing costs, such as the loan origination fee, are charged as a percentage of your loan amount. A smaller amount requires a smaller origination fee.
Other costs come as flat fees, though, so not all costs will be proportionate to your loan size. Smaller home sales prices have another advantage: more affordable monthly payments.
Using down payment assistance for closing costs
If you’re looking for closing cost assistance, you might like to know that there’s financial aid available for your down payment, too.
Talk to a lender about your options. Start here
In fact, down payment assistance is the primary focus for many of the programs described above. Closing cost assistance tends to be an extra benefit tacked on to down payment assistance (DPA) programs.
“Depending on the program and down payment needed, you may be able to apply any remaining funds toward closing costs,” explains Chris McDermott, a real estate investor and former mortgage broker.
“Some down payment assistance programs allow you to use the funds they provide for closing costs, while others may not,” Graham says.
Low-down-payment mortgage options
Getting a loan that requires a low down payment could free up more money to spend on closing costs, whether you’re spending money you’ve saved or money you’ve accessed through a grant or loan.
| Loan type | Down payment | Provider | Special features |
| FHA loan | As low as 3.5% with a credit score of 580 or higher | Federal Housing Administration | Insured by the Federal government, popular low-down payment option |
| Conventional 97 loan | As low as 3% | Fannie Mae and Freddie Mac | Conventional mortgage with low down payment option |
| HomeReady | As low as 3% | Fannie Mae | Income limit of 80% of area median income; homeownership education required when all occupying borrowers are first-time buyers |
| Home Possible | As low as 3% | Freddie Mac | Income limit of 80% of area median income; down payment can come from family, employer-assistance programs, secondary financing and sweat equity |
| VA loan | None required | U.S. Department of Veterans Affairs | For eligible veterans, active-duty service members, and surviving spouses; no down payment needed |
| USDA loan | None required | U.S. Department of Agriculture | For low- to moderate-income borrowers in eligible rural areas; no down payment needed |
FAQs about closing cost assistance
Check your home buying options. Start here
Eligibility varies by program, but most are designed to assist low- to moderate-income individuals and families. Other factors, such as credit score, U.S. residency, and sometimes being a first-time homebuyer, also play a role.
Closing costs typically run 2% to 5% of the home’s purchase price, according to Freddie Mac. On a $350,000 home, that is about $7,000 to $17,500. Your Loan Estimate lists the expected costs for your loan, so compare estimates from more than one lender.
While closing cost assistance can be used with many types of mortgages, it’s not universally applicable. Some programs are tied to specific mortgage types, so it’s important to understand the terms of the program you’re applying to.
Repayment depends on the program. Grants generally do not require repayment if you meet their conditions, while forgivable loans require you to satisfy specified terms. Other assistance loans require monthly payments or defer repayment until events such as selling, refinancing or moving out. Review the repayment triggers and maturity date before accepting assistance.
Yes, it’s often possible to apply for and receive help from multiple sources. However, you should always double-check the stipulations of each program, as some might have restrictions.
It depends on the loan and the costs being paid. FHA and USDA guaranteed purchase loans generally permit contributions toward eligible costs up to 6% of the sales price. VA permits seller-paid closing costs separately from its 4% limit on other seller concessions. Fannie Mae generally allows 3% to 9% for principal residences and second homes, based on LTV/CLTV, and 2% for investment properties. See the table above for calculation rules and limits.
If you’re denied, it’s important to understand why, so you can improve your chances in the future. Sometimes, you can work with a housing counselor or take a homebuyer education course to better prepare yourself for the application process.
There’s no specific program offering FHA closing cost assistance. However, many of the down payment and closing cost assistance programs offered at the state and local levels can be used with an FHA loan. For more information about closing cost assistance in your area and whether it can be used with FHA, contact a local lender or reach out to your state housing finance authority.
No. According to USA.gov, the federal government does not offer grants or free money to individuals to buy a home. Closing cost grants and forgivable loans come mainly from state housing finance agencies, local governments and nonprofits, and some lenders offer their own programs.
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The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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