The Down Payment Barrier

Buying a home is one of the biggest financial steps most people will take—and for many, the hardest part is saving for the down payment. That’s where Washington State’s recently expanded zero-interest down payment assistance programs offer real hope. These initiatives reduce the upfront cost of buying a home, making homeownership a reality for more people. LBC Capital helps first-time homebuyers take advantage of these programs by guiding them through eligibility, paperwork, and financing.

Rising home prices across Washington have made saving for a down payment difficult. Even for buyers with good income and credit, it can be challenging to gather the 3% to 20% required upfront. Without this cash, many otherwise-qualified buyers are stuck renting.

To address this problem, the Washington State Housing Finance Commission (WSHFC) and state legislature have expanded existing programs and introduced new ones aimed at lowering the barrier to entry. The latest programs offer zero-interest loans for down payments and closing costs, with no monthly payments and deferred repayment until the home is sold, refinanced, or no longer used as a primary residence.

What Is a Zero-Interest Down Payment Assistance Loan?

A zero-interest down payment loan is a second mortgage that does not accrue interest and requires no monthly payments. Repayment is deferred until the borrower sells the home, refinances the mortgage, or moves out.

Washington’s Covenant Homeownership Program, passed in 2023, significantly expanded access to these zero-interest loans. Eligible first-time buyers can receive financial assistance to cover down payment and closing costs, removing one of the biggest obstacles to homeownership.

Key Programs Offering Zero-Interest Assistance

The Covenant Homeownership Program is only one part of a larger system of support. Additional zero- or low-interest down payment assistance programs in Washington include:

  • Home Advantage DPA: Offers up to 4% of the first mortgage amount in down payment assistance. The loan has zero interest and is deferred until the home is sold or refinanced.
  • Opportunity DPA: Provides up to $15,000 in assistance at a low 1% simple interest rate, deferred for up to 30 years.
  • Needs-Based DPA: Designed for lower-income households, this program offers up to $10,000 in down payment help at 1% interest, with deferred repayment.

Because these loans don’t require monthly payments, they function much like grants in practice. The borrower gains access to needed funds without affecting their monthly budget.

Expanded Eligibility Makes It Easier to Qualify

Eligibility for Washington’s down payment assistance programs is broader than ever, thanks to legislative changes that prioritize inclusivity and equity.

Who Can Apply?

  • First-time homebuyers or those who haven’t owned a home in the past three years
  • Buyers using the home as their primary residence
  • Buyers who meet income limits based on their county’s Area Median Income (AMI)
  • Participants who complete a homebuyer education course
  • Borrowers working with WSHFC-approved lenders

The Covenant Homeownership Program includes additional eligibility requirements. It is designed to assist individuals and families whose ancestors were impacted by historical housing discrimination. If you can demonstrate that your family lived in Washington before 1968 and were affected by systemic barriers to homeownership, you may qualify for this expanded support.

Some of these loans may even be forgiven after five years of continued residence and income qualification, making them even more attractive to long-term buyers.

How Zero-Interest Assistance Helps First-Time Buyers

Reduces Upfront Cash Requirements

The primary benefit is clear: zero-interest assistance reduces the amount of cash you need to bring to closing. This helps buyers who have strong credit and income but limited savings.

Keeps Monthly Budgets Intact

Because the assistance loan has no monthly payment, it doesn’t impact your debt-to-income ratio. That gives borrowers more flexibility when qualifying for a primary mortgage and helps them stay within their monthly budget after purchase.

Promotes Equity in Homeownership

The Covenant program is designed to close the racial and socioeconomic gaps in homeownership. By targeting communities affected by past discrimination, it opens doors for families historically left out of the housing market.

Encourages Long-Term Stability

Since the loan is repaid only when the homeowner sells or refinances, it rewards those who stay in their homes. Some programs offer forgiveness after a set number of years, incentivizing stable, long-term homeownership.

Enhances Borrowing Power

When paired with a fixed-rate mortgage, these zero-interest loans increase a buyer’s total purchasing power. This makes it easier to afford homes in competitive markets like Seattle, Spokane, or Tacoma.

Real-World Example

Let’s say you’re looking at a $400,000 home. A typical 5% down payment would be $20,000. If you qualify for 4% assistance through the Home Advantage program, you could receive $16,000 toward your down payment. That means you only need to bring $4,000 of your own funds to the table.

Your primary mortgage would cover the remaining $380,000. Since the $16,000 loan is interest-free and deferred, your monthly mortgage payment stays affordable.

Things to Keep in Mind

While these programs are helpful, they come with specific rules:

  • The down payment loan is a junior lien, which means it must be repaid when you sell or refinance
  • Some programs require continued occupancy to qualify for loan forgiveness
  • You must still meet credit and underwriting guidelines for your main mortgage
  • Not all lenders are approved to offer these programs

That’s why working with an experienced mortgage broker is essential. LBC Capital connects buyers with lenders who specialize in down payment assistance. We handle the paperwork, verify eligibility, and help you build a loan package that makes sense for your goals.

Why Work With LBC Capital

Washington’s expanded down payment programs have made homeownership more accessible, but navigating the system can be complex. That’s where LBC Capital comes in.

LBC Capital works directly with approved lenders and program administrators. We ensure you meet eligibility requirements and help you stack multiple sources of assistance if needed. Our expertise simplifies the process and saves you time.