DPA stands for Down Payment Assistance. It is a broad term for programs that help eligible homebuyers cover some or all of the upfront costs of purchasing a home — including the down payment, closing costs, or both.
What Does DPA Mean in Mortgage Terms?
In the mortgage world, DPA refers to any program, grant, or loan that helps a buyer bridge the gap between their available savings and the funds needed to close on a home. DPA is not a loan type — it is assistance that works alongside a mortgage.
DPA can come from many sources: state housing finance agencies, local government programs, nonprofit organizations, employer assistance programs, and certain lender-specific offerings.
Key point: DPA is not "free money with no strings attached." Every program has rules — eligibility requirements, income limits, repayment terms, and conditions that must be met. Understanding those terms before accepting assistance is essential.
Types of DPA Programs
Not all DPA is structured the same way. Here are the most common types:
True Grant
Money that does not need to be repaid when program rules are met. Must come from an acceptable source and be properly documented for the mortgage program.
Forgivable Second Mortgage
Assistance that may be forgiven over time if the buyer stays in the home for a required period. Selling or refinancing too early may trigger repayment.
Deferred Second Mortgage
No monthly payments required, but the balance is due later — typically when the home is sold, refinanced, or the first mortgage is paid off. Deferred means delayed, not forgiven.
Repayable Second Mortgage
A second loan with its own payment schedule. May carry low or no interest. Creates an additional monthly obligation that affects debt-to-income ratio.
DPA Programs by State
Kim Dobyns is licensed in Illinois, Indiana, Tennessee, and Alabama. Here is an overview of the primary state DPA agencies in each state:
IHDA offers several programs that may help eligible Illinois buyers with down payment and closing cost assistance. Programs vary by funding availability, income limits, purchase price limits, and loan type. Popular in the Chicago suburbs, Will County, Kendall County, and surrounding areas.
IHCDA programs may help eligible Indiana buyers with down payment assistance paired with qualifying loan types. Income and purchase price limits apply by county. Available throughout Indianapolis, Fort Wayne, Carmel, and statewide.
THDA's Great Choice Home Loan and related programs may offer assistance for eligible Tennessee buyers. Programs pair with specific loan types and have income and purchase price limits. Available in Nashville, Memphis, Knoxville, Chattanooga, and statewide.
AHFA programs may help eligible Alabama buyers with down payment assistance and may include homebuyer education requirements. Available in Birmingham, Huntsville, Montgomery, Mobile, and statewide.
Who Qualifies for DPA?
Every program has its own requirements, but common eligibility factors include:
- Household income within program limits (varies by county and program)
- Purchase price within program limits
- Minimum credit score requirement
- Approved loan type (FHA, conventional, or others depending on program)
- Primary residence only — not investment properties
- Completion of approved homebuyer education course
- First-time buyer status (required by some programs, not all)
- Working with an approved lender
Important: DPA eligibility is not just about the borrower on the mortgage. Some programs consider household income — meaning income from all adults in the home — not just the people on the loan. This surprises many buyers.
How DPA Works With Your Mortgage
DPA does not replace your mortgage — it works alongside it. The DPA funds help cover your down payment, closing costs, or both, while your primary mortgage covers the purchase price minus what you bring to the table.
The key considerations when combining DPA with a mortgage:
- Some DPA programs only pair with specific loan types (FHA, conventional, etc.)
- A repayable DPA creates a second payment that affects your debt-to-income ratio
- DPA may affect your interest rate on the primary mortgage in some programs
- The lender must be approved to offer the DPA program
- All funds must be documented and acceptable to the loan program
Bottom Line
DPA can be a game-changer for the right buyer. But the right question is not just "How much assistance can I get?" The right question is: "What program gets me into the right loan, with a payment I can live with, and terms I actually understand?" That is where the real planning happens.
If you are in Illinois, Indiana, Tennessee, or Alabama and wondering whether DPA could help with your home purchase, let's review the options together before you assume you need a giant pile of cash to close.
Let's Find the Right DPA Program for You
Down payment assistance is available in IL, IN, TN & AL for eligible buyers. Let's review your income, purchase price, and loan options to find programs that actually fit.
Educational Disclaimer: This content is for informational purposes only. Program availability, income limits, purchase price limits, credit requirements, and guidelines are subject to change. Contact Kim Dobyns directly for a personalized review. Kim Dobyns, NMLS #204859 · Union Home Mortgage Corp., NMLS #2229 · Licensed in IL · IN · TN · AL · Equal Housing Lender.