Locked Out: Should You Take ‘Free Money’ to Buy a Home?

If you’re stretching toward a home purchase, anything that shrinks the pile of cash you need at closing looks pretty appealing.

Homebuying assistance programs — usually in the form of help with your down payment or closing costs — could mean affording to buy now instead of waiting. Jeffrey Ruben, president of WSFS Home Lending in Greater Philadelphia, estimates about 12% of closings at WSFS Bank rely on some type of homebuying assistance.

“Clearly a minority of the borrowing public is taking advantage of this, or has the ability to take advantage of it,” he says.

Eligible buyers receive an average benefit of $18,000, according to Down Payment Resource, which tracks homebuying assistance programs. But qualifications can be strict, and funds can come with strings.

Ruben says government-backed programs are typically the best options because they’re designed with a public goal in mind, such as revitalizing a neighborhood or expanding homeownership. Home builders also offer buyer credits or discounts, but there’s usually something in it for them — like directing buyers to their in-house financing.

“If it’s coming from the guy who’s trying to sell you the house, you know, you have to really kind of be skeptical of that,” Ruben says.

You might have more choices than you think, but look beyond the dollar amount. Consider who’s offering the help and whether the details work for you.

Consider how the assistance itself is structured. It may be a grant, tax credit, forgivable loan or loan you’ll eventually repay. Each one has trade-offs that might not be strictly financial.

“It can turn into, quote-unquote, ‘free money,’” Ruben says. “But there’s a cost.”

Using homebuying assistance might limit your ability to shop around. Government-backed programs can require you to select from a list of participating mortgage lenders. Unsurprisingly, grants given directly through a bank or mortgage company typically require you to get your mortgage there, too.

Some lenders offset the cost of homebuying assistance by charging you a higher interest rate, but the trade-off may be worth it if it helps you buy sooner. To compare total costs, get a Loan Estimate from at least three participating lenders offering assistance — plus a couple “regular” outside offers — to see which mortgage costs less overall.

Finally, ask a tax advisor about any tax implications, too. Depending on the program, you could receive a Form 1099-MISC and need to report the assistance as income.

“Just throwing money at somebody doesn’t solve the ultimate problem of affordability,” says Cheri Salazar, CEO of NestSTEPS, an employer-sponsored homeownership benefits and education platform.

Salazar, who co-founded NestSTEPS in January 2025, is betting on the next wave of homebuying assistance showing up in your employee benefits, alongside health insurance and retirement planning. Employer-backed homebuying programs are still niche, but some companies — usually large employers — see them as a tool for building worker loyalty and retention.

Earlier this year, financial services company BNY announced that eligible employees making $100,000 per year or less could qualify for $6,500 in down payment assistance toward the cost of their first home.

“This is something that the government has been trying and failing to accomplish for decades,” Salazar says. “And we believe that the real solution needs to come through the private sector.”

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