With mortgage rates and housing prices remaining stubbornly high, many potential first-time buyers are wondering whether homeownership is in the cards for them.
For most of these would-be homeowners, it’s not the monthly costs such as mortgage payments, taxes and insurance that are preventing them from putting their name on a deed. It’s the down payment.
“In my state, the median sales price today is $372,000, which means you have to come up with a down payment of $75,000—pretty steep, especially for young people,” Kansas Rep. Tory Marie Blew told a session on homeownership at NCSL’s Base Camp 2024.
“In my state, the median sales price today is $372,000, which means you have to come up with a down payment of $75,000—pretty steep, especially for young people.”
—Kansas Rep. Tory Marie Blew
Kansas is among a growing number of states that have established or are considering programs to help first-time and other homebuyers get into the market, including homeownership savings accounts, down-payment grants or loans, and mortgage-interest buydowns.
The Kansas program, launched in 2021, allows the creation of savings accounts that provide tax deductions, credits and other incentives to save for down payments and closing costs. “It has been a great new tool in our toolbox to help people get on the path to achieving their dream of buying or building a home,” Blew says.
Twenty-one states and Washington, D.C., have authorized such savings accounts, according to Heather Morton, director of NCSL’s Financial Services, Technology and Communications Program. Eligibility requirements—and limits on how much can be deposited into the accounts each year, and over time—vary widely, she says.
Morton also says that 22 states currently offer programs that provide low-interest or, in some cases, forgivable loans to help buyers cover their down payments, closing costs and other out-of-pocket expenses, such as inspections. These programs typically are aimed at helping low-income and/or first-time home buyers, and many have income caps based on household size. In some states, eligibility for loans and grants is restricted to certain groups, such as teachers, government employees or military veterans.
Another approach, Morton says, is mortgage-interest buydown programs, which have been authorized in seven states. Borrowers may opt to pay discount points—a form of prepaid interest—up front to their mortgage lender. By paying these points at closing, the borrower can “buy down” the interest rate for the life of the loan, decreasing monthly mortgage payments and offering financial relief during the early stages of homeownership.
In 2024, 13 states and the district enacted legislation or adopted resolutions involving various forms of assistance to prospective homebuyers, Morton says. In the 2023 session, 12 states did so.
“State legislators are very aware of this issue,” Morton says, “and they’re acting to put in place policies and programs that will help people get into the market.”
In the Q&A segment of the session, one participant asked why down-payment assistance programs aren’t available in more states.
“Well, first, there has to be some political will,” Morton says. “And then there are financial considerations.” Homeownership savings accounts and other mechanisms offering tax credits and deductions “have an impact on state budgets and the general fund, so that has to be taken into account.”
As for down-payment programs that offer loans and grants, “the biggest challenge is the need for having as stable and continuous a source of funding as possible,” she says.
Morton cited Connecticut’s struggles to get its Time to Own program up and running. “It’s a very popular program that has helped more than 4,800 first-time homebuyers since it began in 2022,” she said. “But it’s run out of money twice and had to be temporarily suspended.”
Connecticut lawmakers recently decided to allow the issuance of up to $40 million in bonds, by the state housing authority, to provide additional funding for the Time to Own program.
Suzanne Weiss is a Denver-based freelance writer.