The Quick Read: It depends on the shape of the assistance. A grant and a forgivable second lien add no monthly payment, while a repayable second lien adds a second payment on top of the first mortgage. Assistance can also change the first mortgage itself, through the loan size, the mortgage insurance, and the debt-to-income ratio a lender must qualify. The buyer’s own choices matter too, because using assistance to buy a pricier home raises the payment no matter which option is used.
The Four Shapes, and What Each One Does to Your Payment
The payment effect is set by the structure, not by the label “assistance.” Across the wholesale programs Lendmire places files with, there are four structures, and they behave very differently month to month. Lendmire is a mortgage broker, so these are arranged through wholesale lenders, subject to program guidelines and full underwriting.
| Structure | Monthly payment on the assistance | Repaid? | Credit floor |
|---|---|---|---|
| Grant | None | Nothing to repay | 620 |
| Forgivable second | None, no interest | Forgiven after 36 or 60 on-time payments | 640 |
| Repayable second | Yes, 30-year amortization | Balloon due in year 10 | 660 |
| Refinance-cost second | Yes, same terms as repayable | Balloon due in year 10 | 660 |
The grant is the simplest. It is 2% or 3.5% of the purchase price, released at closing, with no lien, no interest, and no payment. Your monthly cost is just the FHA first mortgage.
The forgivable second is 3.5% of the lesser of price or appraised value. It is a lien, but it carries no interest and no payment. Make the first 36 or 60 first-lien payments on time, depending on the version, and it is forgiven.
The repayable second is a real loan. It is 3.5% or 5% of the lesser of price or value, it bears interest, and it amortizes on a 30-year schedule with a balloon due in year 10. Its payment lands on top of the first mortgage payment every month.
The refinance-cost second works the same way but sits on an FHA refinance, covering 1% to 3.5% of the balance toward closing costs.
So When Does the Payment Actually Go Up?
Three separate things can raise the cost, and buyers often blur them together.
1. A second monthly payment. This applies to the repayable structures only. If the second amortizes, you carry two mortgage payments. Grants and forgivable seconds avoid this entirely.
2. A bigger first mortgage than you planned. Assistance is cash you did not have to bring. If it nudges you toward a higher-priced home, the first loan grows and so does the payment. That is a choice, not a penalty of the program. A buyer who keeps the same price and uses a grant sees the same first-lien payment they would have had anyway, with less cash out of pocket.
3. Mortgage insurance that comes with the FHA loan. The assistance options sit on FHA, USDA, or HUD-184 first liens. On FHA, the upfront premium is 1.75% of the base loan and can be financed into the loan. Annual mortgage insurance is charged by tier, and on a 30-year loan above 95% loan-to-value at or below the $726,200 base-loan line it is 0.55% of the balance. That insurance exists because FHA leverage is high, with or without assistance. A buyer putting 3.5% down pays it whether the 3.5% came from savings or from a grant.
One sentence on a common worry: no option here changes what the first lien costs by itself. Whether any of it raises your total depends on which of the three items above applies to you.
Does a Second Lien Count When the Lender Qualifies You?
Yes, when it carries a payment. A repayable second goes into the housing ratio, which can shrink the first mortgage you qualify for. USDA’s own handbook lists subordinate liens among the monthly housing expenses in its payment ratio, with USDA HB-1-3555 Chapter 11 setting the standard thresholds at 29% for housing and 41% for total debt, with flexibility when compensating factors exist. HUD’s guidance for Section 184 buyers says the same thing plainly: a monthly assistance payment adds to debt-to-income and lowers the loan amount a buyer may qualify for, per HUD Section 184 Borrower Resources.
A grant adds no debt. A forgivable second carries no payment, so it generally does not add to the monthly ratio, though the lender follows the program rules and the automated underwriting finding on each file. On FHA, manual underwriting uses 31/43 ratios, and automated approvals commonly allow more. The assistance options follow the automated finding.
If your file is tight on debt-to-income, that is the real fork in the road. A grant or forgivable structure protects your qualifying room. A repayable second spends some of it. Lendmire’s piece Does a Down Payment Assistance Second Mortgage Count Against Your DTI? goes deeper on that ratio question.
Deferred Is Not the Same as Free
A lien with no payment can still matter later. HUD’s FHA Connection secondary financing background defines secondary financing as any financing other than the first mortgage that creates a lien against the property, and it says a soft or silent second is not treated as a gift even if no payment is due or the debt is eventually forgiven.
What that means for you:
- Forgivable second: forgiveness depends on keeping the first lien current. A 90-day or longer delinquency breaks the clock.
- Sale or refinance: a lien must be dealt with when you sell or refinance. Ask how the note treats a refinance before you sign. USDA files, for example, require an assistance loan to be subordinated to a new loan or paid off, not rolled in.
- Repayable second: the balloon in year 10 is a planning item. You will need to refinance, sell, or pay it off by then.
The grant is the only structure with no lien at all. That is the difference between “nothing to repay” and “nothing to pay monthly.”
Which Buyers Fit Which Shape?
Matching the structure to the household is the real decision. These are patterns, not promises, and every file is underwritten individually.
A renter with thin savings and steady income. A grant at 2% or 3.5% of price can cover most of the FHA minimum investment without adding debt. The catch is the eligibility test: household income at or below 140% of area median income, unless a qualifying category applies. The categories are broad: first responders, educators, medical workers, civil servants, military personnel, first-time buyers, or a property in an underserved census tract. A homebuyer education course is also required, and the grant is not offered in Washington. It pairs with FHA first liens only.
A public-service worker or repeat buyer moving up. Nobody has to be a first-time buyer. Repeat buyers qualify across the options. The three-year first-time definition is only one of the grant’s categories. If you are an educator or nurse, you may qualify for the grant without any income test.
A buyer who earns too much for the grant. The second-lien options have no income limit, beyond USDA’s own on a USDA first lien. That makes a forgivable or repayable second the likelier path. The forgivable version asks for a 640 credit score; the repayable one asks for 660. Both also pair with USDA and HUD-184 first liens, and a lower-scoring co-borrower’s score can be blended in under the program’s rules.
A buyer whose ratios are already stretched. Skip the repayable second unless the numbers clear with it included. If the only way a file qualifies is by leaning on a balloon loan, that is a signal to rethink the price point, not to find a cleverer structure.
All of these are for an owner-occupied primary residence. Assistance is never available on a second home or a rental.
The Tradeoff Nobody Draws Clearly
Here is the honest comparison. A repayable second reduces the cash you need at closing, and at 5% it can also cover closing costs and prepaid items (the 3.5% minimum investment plus 1.5% toward closing costs). The price is a second payment, a second set of disclosures, and a balloon. A forgivable second gives you much of the cash benefit with no payment, but it asks for a higher credit score than the grant and ties you to a multi-year payment record.
If keeping the monthly budget flat matters most, the grant and forgivable structures win. If you simply cannot get to closing without the larger repayable amount, it can be the right tool, provided the ratios hold with its payment included. Buyers who treat the second as “free” are the ones surprised in year 10.
One more point. Pennsylvania, Colorado, and other state housing agencies run their own programs with their own structures. State housing finance agency assistance typically comes as forgivable grants, zero-interest deferred seconds, or full-interest amortizing seconds, and the mix varies by state. Many public programs also cap assistance or add recapture periods. Compare the structure first, because the label alone tells you very little.
Key Terms Defined
Second lien: a loan secured by your home that ranks behind the first mortgage.
Forgivable second: a second lien with no interest and no payment that is erased if you meet its conditions.
Repayable (amortizing) second: a second loan with interest and a monthly payment spread over a set term.
Balloon: a lump-sum balance due at the end of a stated period, in year 10 for the repayable second.
Debt-to-income ratio: your monthly debts divided by your monthly income, used to judge what you can afford.
Combined loan-to-value: the first and second liens together, measured against the home’s value.
Questions to Ask Before You Choose
Bring these to the lender, and ask for the payment with and without the assistance:
- Is this a grant, a forgivable second, or a repayable second?
- Does the assistance create a lien, and what are the terms of forgiveness or repayment?
- Does it add a monthly payment, and is that payment counted in my qualifying ratios?
- What happens to the second if I sell or refinance?
- Which first-lien types does it pair with, and does it change my mortgage insurance?
Seeing the first-lien payment alone, then the combined total, answers the title question for your own file in a few lines. Buyers who want program-level detail can start with Lendmire’s overview of down payment assistance programs, and the piece Repayable Second Mortgage Terms Across Down Payment Assistance Types lays out the balloon and amortization mechanics.
Frequently Asked Questions
Will a grant make my monthly payment go up?
No. A grant is 2% or 3.5% of the purchase price, released at closing, with no lien, no interest, and nothing to repay. Your payment is the FHA first mortgage alone. It rises only if you choose a more expensive home because of the extra cash.
Does a forgivable second add a monthly payment?
No. It carries no interest and no payment. It is forgiven after 36 or 60 on-time first-lien payments, depending on the version. The risk is falling 90 days or more behind, which breaks the forgiveness clock.
Can assistance lower the mortgage I qualify for?
Yes, when it is a repayable second. Its monthly payment counts in the housing ratio and reduces qualifying room. Grants and forgivable seconds add no payment, so they generally leave that room alone, subject to the lender’s automated underwriting finding.
Do I have to be a first-time buyer?
No. None of the options requires a first-time buyer, so repeat and move-up buyers qualify. The grant has an income test of 140% of area median income unless a category applies, and it also requires a 620 credit score, an FHA first lien and homebuyer education. The second-lien options have no income limit beyond USDA’s own on a USDA first lien. Exact terms depend on lender and investor guidelines, credit profile, reserves, and property review.
Can I use assistance on a rental or second home?
No. Every option is for an owner-occupied primary residence only.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving home buyers in 16 states. Down payment assistance programs are arranged with FHA, USDA and HUD-184 first liens through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
If you are buying a primary home and want to see whether a down payment assistance option fits your file, Lendmire can help you compare the grant, forgivable and repayable structures alongside an FHA, USDA or HUD-184 first mortgage.
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References
2. HUD Section 184 Borrower Resources
This article is part of Lendmire’s down payment assistance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Does a Down Payment Assistance Second Mortgage Count Against Your DTI? · Does Down Payment Assistance Have to Be Paid Back? · Does Down Payment Assistance Affect Payments for High Earners?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.