So here are some more details about the program. The program is VHDA Downpayment Grant Program with conventional loan which gives 3% of the house price as grant towards downpayment with no obligation to pay and no PMI. However, the catch is in the interest rate which is 4.625% for a 30 year loan. For a conventional loan with 5% downpayment on the same house, the interest rate is 4.375.

Using zillow mortgage calculator, I see that it makes more sense to go with the grant program than the regular one. Below are the two cases: * Mortgage payment of $2106/month with 4.625% interest and 3% downpayment * Mortgage payment of $2223/month with 4.375% interest and 5% downpayment

Now, suppose I go with the conventional loan with 5% downpayment, it will take me another year to save that up which means $1500 in rent down the drain i.e. $18k. Plus am losing on the free 3% money ($10k) from the grant program. I am assuming the higher interest rate makes up for the no PMI and I can re-finance the loan (the grant one) once I reach more than 22% of the principal.

Now, does it make more sense to go with the grant or I am still missing the point here? Thanks for your time and help.