How first-time homebuyers can find down-payment assistance on Long Island

Down-payment assistance programs can help first-time homebuyers on Long Island cut down on the time they need to save to purchase a home.

But first-time buyers need to know how to apply.

The need for down-payment assistance has grown as home prices have increased significantly in recent years. The median price of a single-family home in Nassau County last month rose to a record $875,000, while the median in Suffolk also rose to an all-time high of $714,000.

For buyers who wish to put 20% down, that translates to a down payment of $175,000 in Nassau or $142,800 in Suffolk. Of course, buyers can purchase with as little as 3% down or can purchase with no money down if they qualify for a U.S. Veterans Affairs loan.

For buyers looking to boost their down payments, Newsday spoke with local housing nonprofits and the State of New York Mortgage Agency about what programs are available, how eligibility is determined and how applicants can give themselves the best opportunity to get selected.

What programs are available?

Applications are currently open for buyers purchasing in the Town of Brookhaven and the Town of Southampton, which are administered by local housing nonprofits.

Long Island Housing Partnership also administers programs open to buyers in Nassau and Suffolk counties, but the application period for those programs is currently closed. Its programs provide up to $50,000 in assistance.

Applications tend to open early in the year, as new funding becomes available, and the nonprofit recommends that potential applicants follow its Facebook and LinkedIn accounts to learn of new opportunities.

Interested buyers can also track the availability of programs at lihp.org or call the nonprofit at 631-435-4710.

The State of New York Mortgage Agency offers two down-payment assistance programs for income-eligible buyers. One allows homebuyers to receive up to 3% of the purchase price, up to a maximum of $15,000, as a loan that is forgiven if the homeowner stays in the home and doesn’t refinance for 10 years.

A second, newer program from SONYMA offers up to 5% of the purchase price with no cap. That program helps serve families who need more than $15,000, said Dina Levy, senior vice president of homeownership and community development at New York State Homes and Community Renewal.

"There was a gap in the market here that needed to be tended to, which is housing prices have gotten higher and higher. Certainly that’s true on Long Island," said Levy, who oversees SONYMA. “We recognized that we needed a deeper down-payment assistance product."

Are there strings attached?

Yes, depending on the program, the grants come as zero-interest loans that are forgiven after a certain amount of time as a way to prevent buyers from quickly flipping homes.

The uncapped SONYMA program requires homebuyers to pay back the assistance in full when they sell or refinance, but there is no interest on the loan and buyers don’t have to make monthly payments.

The Town of Brookhaven program has a 10-year window before the loan is forgiven.

Despite the conditions, the money still provides a benefit for families, said James Britz, chief operating officer at Long Island Housing Partnership.

"At the end of the day, it's reducing your mortgage by $50,000, so whether you have to pay it back or not in three years, your house may increase in value and you may make a return on investment," he said.

Community Development Long Island, the Melville-based nonprofit that offers home loans, provides an option to borrow up to $75,000 as a down-payment loan that must be repaid with a below-market interest rate. One of the biggest obstacles for buyers — even those who get aid — is finding properties with a monthly payment they can afford, said Gwen O'Shea, CEO of CDLI.

"The inventory of properties being sold at that price point that is financially viable for a household at that income level — they're far and few between," she said.

Who’s eligible for down-payment assistance?

Eligibility rules vary by program, but most are open to low- and moderate-income borrowers with some restrictions on the price of the home.

For a current Town of Brookhaven program, recipients must earn no more than 80% of area median income, or $92,350 for an individual. That limit rises with household size, and a family of four could qualify while earning $131,900.

Other programs have higher income limits. SONYMA’s down-payment assistance programs allow incomes of up to $158,300 for a couple or $184,600 for families of three or more.

Do lenders offer assistance?

Buyers should check with their lender about possible down payment or closing cost assistance. SONYMA maintains a list of lenders who participate in its programs online.

What kind of properties are eligible?

Programs typically allow single-family homes, condos and co-op apartments that will serve as an individual’s primary residence. Two-family homes aren’t eligible for certain programs.

SONYMA allows one- to four-unit homes. Properties must be appraised for the sale price to qualify for a SONYMA mortgage.

Any application mistakes to avoid?

The programs involve compiling financial documentation, such as pay stubs and tax returns, so organizations recommend working with a HUD-approved housing counselor to prepare.

Are there restrictions on the price of the home?

Yes, most programs have a maximum purchase price.

For the programs LIHP administers, the maximum purchase price this year was $608,000 in Nassau and $551,000 in Suffolk, which is established by the U.S. Department of Housing and Urban Development and updated annually.

That has made it challenging to find applicants with incomes low enough to qualify who can also get their offer accepted by a seller at a time when many have multiple offers to choose from, Britz said.

"We’ve had the most success this year in the Town of Brookhaven because I think they still have a little bit more affordability in that town, whereas in Nassau and Babylon, first-time homeowners struggle to try and find a home within their price range," he said.

Other programs offered through SONYMA have higher home price limits of about $1.25 million on Long Island, while the maximum allowed under Southampton's program is nearly $1.67 million.

Who is considered a first-time homebuyer?

Anyone who has never owned a home is eligible. But past homeowners who have not taken the mortgage interest deduction on their tax returns in the past three years can also qualify. Certain individuals are always eligible, including U.S. veterans and buyers in federally designated target areas that have historically been subject to disinvestment.

How many people end up getting assistance?

LIHP said it’s given out about 40 of the grants in the past three years, including 11 in Brookhaven and one in Nassau County this year.

SONYMA said it’s given out nearly $14.3 million in down-payment assistance since 2021 through 1,073 grants. That’s an average award of almost $13,300.

LIHP's Britz said even if buyers are not ready to purchase right now, they can benefit from the nonprofit's housing counseling.

"Whether or not the marketplace comes down to a better level next year or in two years, at least it prepares you to be ready and understand what the program is and what to look for when looking for a home," he said.

Are there other programs to be aware of?

Applicants buying homes that need significant repairs also can qualify for additional down-payment assistance, with $40,000 in additional assistance available, including at least $23,000 that must be used for home rehab projects, according to Long Island Housing Partnership.

That additional grant can stack on top of other down-payment assistance, translating into $65,000 in down-payment assistance and $23,000 for rehab, and it’s currently available for applicants applying in the Town of Brookhaven.

By Jonathan LaMantia

jonathan.lamantia@newsday.com@jonlamantia

Jonathan LaMantia covers residential real estate and other business news on Long Island. He previously covered the business of health care for Crain's New York Business.