The National Association of Independent Housing Professionals says a growing number of state and local governments are now offering what are called "down payment assistance programs" which are grants or low- and no-interest loans to first-time buyers or those who haven't owned a house in a few years.

The president of the advocacy group, Marc Savitt, estimates the number of programs to be somewhere around 1,000 nationally, and has increased 3% to 5% in the last six months.

At the same time, more banks are now willing to work with borrowers who need down payment assistance, even though these buyers were considered too risky just 18 months ago.

State housing agencies say they're seeing the biggest spike in lender interest since before the housing downturn. Florida's down payment assistance agency now works with 65 lenders, up 12% from a year ago and the number of participating lenders in North Carolina has grown 22%.

To qualify, you have to be considered a low- and middle-income buyers who has either never owned a home, or hasn't owned one in a few years . The income limits vary from state to state as well as locality. But once you qualify, the benefits can be substantial.

The programs offer up to $80,000 in loans with interest rates from 0% to 2% to people with little or no money to put down. And then, because participants often have to get their mortgage through the programs' preferred lenders, the primary mortgage rates are also low, often 0.75% to 1% lower than average rates. That can be a better deal than Federal Housing Administration-insured mortgages, which require annual mortgage insurance and an upfront fee, and may have higher interest rates.

Good idea?

Even for cash-strapped states like California, these programs are apparently worth the cost. This is a way to boost homeownership, which some economists say leads to more jobs and higher home prices. Not everyone agrees.

Keith Gumbinger, a vice president at HSH.com, which tracks mortgage data, says that borrowers who “don't put any of their skin in the game – or very little of it – are more risky." He points out that such borrowers tend to have higher incidents of default—even if they have prime credit.

Scott Stern, CEO of Lenders One, has a different view. The mortgage banker argues that assisted buyers are a lower-risk proposition these days, mostly because banks are still lending to borrowers with high credit scores and detailed income documentation.

There is no official database of all the programs in the country, but SmartMoney magazine asked mortgage lenders and realtors for help in compiling a list of programs. It found seven that were relatively generous.

1. California Housing Finance Agency's School Facility Fee Down Payment Assistance Program

What You Get : First-time home buyers or buyers who haven't owned a property for at least three years purchasing a newly-constructed single-family home or condo receive a grant for $5,180 on average for down payment, closing costs or to pay for mortgage costs. The income restrictions vary by county; most generous in Santa Clara at up to $124,200 for family of four and there’s no limit on the purchase price.  The payback terms are exceptional. The grant is forgiven for buyers who stay in the home for at least three years.

2. California's State Teachers' Retirement System -- the 80/17 Program

What You Get : Members of CalSTRS, public school and community college teachers and employees, can get two mortgages -one for 80% of the purchase price and a second for 17%; borrowers put down 3% of their own money. There is no income restriction and combined mortgages can total up to $650,000. Payback terms see interest rates fluctuating and are currently 5.375% and 6.375% and payments on the second mortgage are deferred for the first five years

3. Florida's Housing Finance Corporation Down Payment Assistance Program

What You Get : First-time home buyers can get up to $7,500 in down payment assistance. The income restrictions vary by county; in Palm Beach, that's up to $75,400 for a family of four. The purchase price caps at $466,125 and repayment is deferred for up to 30 years at 0% interest or in some cases until the house is sold.

4. New York City's Department of Housing Preservation and Development's HomeFirst

What You Get : First-time home buyers can get up to $25,000 for down payment or closing costs for a one- to four-family home, condo or coop. There are strict income restrictions with a cap at 63,450 for a family of four. The purchase price is up to $729,750. As for payback terms, a zero-interest loan; borrowers who live in their home for at least 10 years don't need to pay back.

5. North Carolina Housing Finance Agency's Down Payment Assistance

What You Get : First-time home buyers are those who haven't owned a home in three years can get up to $8,000 for down payment or closing costs. Income restrictions vary by county; in Mecklenburg where Charlotte is located, it's $53,750 for a family of four. Purchase price is capped at $220,000. Repayment is deferred for up to 30 years at 0% interest or until house is sold, refinanced, turned into a rental property, or the mortgage goes into default at which time full payment is owed.

6. Mayor's Office of Housing of the City and County of San Francisco Down Payment Assistance Loan Program

What You Get : First-time home buyers who've never owned a property can get up to $100,000 or 20% of the purchase price, whichever is less, for a single-family house, condo or co-op. Income is capped at $119,300 for a family of four and the top purchase price is up to $637,645. The loan is deferred for 40 years at 0% interest from the date of purchase or until the property is sold or rented; the amount due is the size of the loan plus the appreciation of the property.

7. West Virginia Housing Development Fund's Homeowner's Assistance Program

What You Get : Buyers who haven't owned a home in three years can get up to $15,000 for down payment or closing costs in Jefferson County, a popular hub for Washington D.C. commuters. Income is restricted to $102,900 for three or more person household and the purchase price is capped at $656,775. A 15-year loan that's deferred for the first five years at 0% interest and shifts to 2% amortized during the last 10 years; if the home is sold or turned into a rental property before this period, borrowers repay the balance in full.