Buying a home is a serious investment and normally requires a large amount of money upfront before making the purchase. In most cases, you're expected to pay 20 percent of the total cost, and that's the minimum. Sometimes you may be asked to hand over more. Not everyone has the money to make a downpayment on a house, but no worries: There are other options out there.

What are Housing Grants?

A housing grant is one type of grant that gives people an opportunity to afford a home. Federal agencies as well as local and state governments offer grants through organizations, such as Housing and Urban Development, covering the costs of single, multi and low-income housing. The grant money is often used as a downpayment on a house and can also be used to cover the costs of health care facilities in some cases.

How Does Downpayment Assistance Work?

Downpayment assistance programs are managed and controlled by local or state housing agencies as well as nonprofits and lenders. They come in the form of interest-free loans, grants and debt that you have to pay off completely. The amount and type depends on what you qualify to receive and if you qualify for the assistance at all.

Once you qualify for assistance, you'll have to agree to some terms, one of which is staying in the home for a predetermined period of time. Otherwise, you may have to pay the entire amount back if you received a loan. These downpayment assistance programs are available in every state, giving everyone who qualifies a way to put money down on their new home.

Who Qualifies for Downpayment Assistance?

Unfortunately, not everyone qualifies for assistance as every state has different rules for deciding who's eligible. In most cases, it's based on the total cost of the home and how much income you bring in per year.

The states don't always make it easy either. Sometimes they ask that your yearly earnings lie within 120 percent of the area median income. Some states require 80 percent or below; it all depends on where you live.

Some of these downpayment assistance programs are only available to first-time homebuyers. So if you've owned a home in the past, you're less likely to qualify for assistance. First-time buyers who do qualify are often asked to attend training seminars to learn how to be financially responsible when paying mortgage on a home.

Do Credit Scores Affect Housing Grants?

Assistance programs are created to help people who have a hard time getting a loan or other financial assistance when buying a home. Despite that, lenders will definitely check your credit to see if you're a risk. If you're trying to secure a grant, your credit may be less of an issue.

Whether they check your credit or not, it's always smart to work on it before trying to buy a home. It'll benefit you in the long run. A higher credit score will help you secure an assistance loan and help you when purchasing items or making repairs on your home in the future. Paying down any existing debt will also help you to get pre-approved for assistance.

How Much Money Can You Receive?

Each state handles housing assistance differently, so the amount of funding that you can receive varies. In some states, you may be able to receive 20 percent of the home's purchase price. Other states cap the assistance at a flat amount, such as $15,000.

It also depends on whether you're getting a grant or a loan. If you qualify for both, housing grants are always the better option since you won't have to repay the amount unless you move out before the agreed time.

Downpayment Assistance for First-Time Homebuyers

If you can't afford 20 percent down on a home, you're not out of luck. There are options out there to help you secure a grant or a loan based on your income.

Downpayment assistance programs are available through state and local authorities and will help you secure a home as long as you meet the qualifications. Whether it's the Step Up Program in Alabama or the VHDA Assistance Grant program in Virginia, there's a program to help you purchase a home for you and your family.