Being a homeowner has long been associated with the American dream. However, there are many individuals who would love to own their own home, but feel that they cannot afford it. A key concern could be an inability to come up with money for a down payment.

Many are surprised to learn there are legitimate grants offered by the federal government, state government, or "non profits" to help with down payment assistance. Many will likely have several hoops to jump through and stringent requirements. However, compared with the benefits of owning a home, the red tape required to receive a grant is minimal.

How Do You Know If You Qualify for a Grant to Purchase a House?

There is a finite amount of funds set aside for home grants each year. They are often distributed on a first qualify, first serve basis. You may need to be patient and wait for funding to be replenished or apply for multiple grants every year until they approve you.

Be sure to know what you are signing up for. Not all down payment or mortgage assistance programs are grants. Some of them are low interest or no-interest loans. Sometimes, if you pay back the loan diligently, it gets forgiven by becoming a grant.

Many grants for homeowners are designed for first-time home buyers. The term “first-time home buyers” can mean different things, depending on the grant you apply for. Sometimes, it means that it must be the first time that you have ever purchased a home. For other grants, it means that you cannot have owned a home within the last three years. Do your diligence and be certain to research various grant or loan programs before deciding whether to apply.

Most grants place a cap on the amount of money they will give you. Many are designed to help lower income individuals purchase their first home. Some grants have a limit on the home value you can apply for. Before applying for one of these grants, calculate the home's value and make sure that it’s something you can honestly afford.

Where to Look to for a Grant

Housing finance agencies are usually a good place to look for grants. State and local Housing Service Alliances (HSA) receive funding from the federal government that helps them assist home buyers with their down payments.

The Good Next-Door Neighbor grant can cover up to 50 percent of the home value for people in professions who make them good neighbors. These include EMTs, elementary and high school teachers, firefighters, and those in law enforcement. An additional requirement is that these individuals be willing to live in areas classified as “revitalization areas.” This usually means that the neighborhood is struggling, but the hope is that by injecting “good neighbors,” things will continue to improve.

Lenders are another excellent source for grants. Some may offer thousands of dollars to cover closing costs and more money to help with down payment assistance. Not all lenders are generous, but it is worth exploring. Other options could include Fannie Mae, mortgage credit certificates, USDA loans, and VA loans.

If you’re ready to start searching for that first home, but worried about your ability to afford the down payment or closing costs, talk to some of the above-mentioned agencies. Advice is free. The more advice you receive, the better the decisions you'll make.