The Quick Read: Repayment triggers differ across grant and forgivable DPA because the two have different legal forms. A grant is a one-time credit with no lien, so nothing sits on the title that could come due. A forgivable second is a real loan secured by your home, and it stays a loan until the forgiveness schedule finishes. So a grant has no repayment event to track, while a forgivable second has a set of events (a sale, a refinance, a payoff) that can call the balance due before you earn full forgiveness.
Here is the short version for each shape the wholesale network arranges:
- Grant: nothing to repay, no lien, no payment, no interest. It is released at closing.
- Forgivable second: no interest and no monthly payment. It is forgiven after the first 36 or 60 on-time first-lien payments, depending on the option.
- Repayable second: a real loan with a monthly payment and a balloon due in year 10.
- Refinance-cost second: same repayment terms as the repayable second, used on an FHA refinance.
The word “assistance” covers all four. It tells you almost nothing about what you owe later. The legal form does.
Why the Label Doesn’t Decide Anything
The legal form of the assistance decides repayment, not the program name. If the assistance creates a lien on your home, it is a loan. If it doesn’t, it is a true grant. Programs use “grant” loosely, so the first job is to find out which one you are actually being offered.
Across the wholesale programs placed through Lendmire’s down payment assistance programs, the split is clean. The grant option has no note and no recorded lien. The forgivable and repayable options each have a note and a recorded second lien behind your first mortgage. That one structural fact drives everything else here.
It also explains why a forgivable second feels like a grant but doesn’t behave like one. You don’t make payments, and you don’t accrue interest. But the lien is still there, and it still has to be released.
The Grant: Where There Is Nothing to Trigger
A true grant has no repayment trigger because it has no debt. The grant option runs at 2% or 3.5% of the purchase price, applied toward the FHA minimum required investment. It is released at closing. Nothing is recorded against the property, and no payment schedule exists.
That means a sale, a refinance, a move-out, or a payoff of the first mortgage does not call anything due. There is no balance to call.
Here is what the grant does ask of you up front:
- A credit floor of 620 (the lowest representative score among all borrowers on the file).
- Household income at or below 140% of area median income, unless a qualifying category applies. Categories include first responders, educators, medical personnel, civil servants, military personnel, first-time buyers, or a property in an underserved census tract.
- A HUD-approved homebuyer education course. You pay up front, and the cost is credited back at closing.
- An FHA first lien (203(b), repair escrow, Limited 203(k) or Standard 203(k)) at 96.5% loan-to-value, on a 1-4 unit primary residence.
The grant is not offered in Washington, and it cannot be combined with any other assistance program.
Notice what is missing. No repeat-buyer penalty, and no first-time-buyer requirement. A buyer moving up can use it, provided income or a category fits.
The tradeoff is in how grant funds are supplied. Public programs that fund grants can run through their money faster than loan programs, because loan repayments replenish loan funds. A grant that doesn’t need repayment is good for you and harder on a program’s budget. If grant funds are the better fit for your situation, that argues for starting the file sooner rather than later.
The Forgivable Second: A Loan That Shrinks to Zero
A forgivable second is a lien that is forgiven only if you keep making on-time first-mortgage payments. It covers 3.5% of the lesser of the purchase price or appraised value. It carries no interest and no monthly payment. Forgiveness comes after the first 36 payments or the first 60 payments, depending on the option you choose, and none of those payments can reach 90 days late.
Forgiveness is earned. It is not automatic on day one. Until the schedule completes, the lien remains on the title, and the note controls what happens if something changes.
Two features of this structure matter most:
1. The trigger list lives in the note. Sale, payoff of the first mortgage, refinance, and ceasing to live in the home as your primary residence are the events a buyer should look for. Programs in this category often call a balance due on those events. Read the note and the program disclosure for the exact list on your file.
2. The clock counts on-time payments, not calendar time. A 90-day delinquency in the first lien can interrupt forgiveness. Staying in the home isn’t enough on its own.
FHA treats any lien-based assistance as secondary financing, not a gift, even when it carries no payment or is forgiven over time. HUD’s FHA Connection background page says so directly. The same page notes that a federal home loan bank set-aside grant program is not counted as secondary financing, which is a clear example of the grant-versus-lien line.
For a deeper look at the forgiveness mechanics, Lendmire’s piece Is a Grant Forgiven Differently Than a Forgivable Second Mortgage? walks through it.
The forgivable second pairs with FHA, USDA and HUD-184 first liens. The credit floor is 640 (660 blended), and it runs on 1-2 unit properties. No income limit applies beyond USDA’s own on a USDA first lien, and manual underwriting is allowed.
The Repayable Second: Triggers Plus a Payment
A repayable second behaves like a mortgage: monthly payments now and a balloon in year 10. The second is 3.5% or 5% of the lesser of price or appraised value. At 5% it also helps with closing costs and prepaid items. It is interest-bearing, amortizes over 30 years, and the balance comes due in a lump sum in year 10.
Because it has a payment, it counts in your debt-to-income ratio. A grant and a forgivable second add no payment. This one does. If the payment question is the one keeping you up, Lendmire’s article Does a Grant or Second Mortgage DPA Raise Your Monthly Payment? covers it directly.
The trigger picture is different here. A sale or a refinance of the first lien pays the second off, because the loan is a normal debt with a normal payoff. Even if you do none of those things, year 10 forces the balance due. That balloon is a scheduled event. You don’t wait for it to happen to you.
The repayable option also has these file details:
- Credit floor of 660 (670 blended), with AUS approval required and no manual underwriting.
- High-balance first liens allowed.
- A separate loan disclosure and a balloon disclosure, on top of your first-mortgage paperwork.
- No lender fees on the second itself. Prepaid interest, recording, settlement and registration fees are the only costs.
The refinance-cost second works the same way on repayment. It covers 1% to 3.5% of the lesser of the current first-lien balance or appraised value toward the closing costs of an FHA 203(b) refinance, with combined leverage up to 104%. It can’t be used on a streamline refinance. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
The Trigger Matrix, Side by Side
The matrix below shows which events call each shape due. Treat it as a map, not a contract. The note on your file controls, and programs vary at the edges.
| Event | Grant | Forgivable second | Repayable second |
|---|---|---|---|
| Sell the home | Nothing owed | Unforgiven balance typically due | Balance paid off |
| Refinance the first loan | Nothing owed | Usually due or re-subordinated | Paid off or re-subordinated |
| Stop living there | Nothing owed | Typically a trigger | Loan stays, payments continue |
| Pay off the first loan | Nothing owed | Typically due | Balance due |
| Reach the schedule end | Not applicable | Forgiven | Balloon due in year 10 |
| Miss payments | Not applicable | 90 days late can stop forgiveness | Default terms in the note |
Two rows deserve a closer look. Refinance is the trigger most buyers overlook. Occupancy is the second.
Refinancing: The Trigger That Catches People Who Stay
A refinance can call a second lien due even if you never move. The first loan is replaced, so the second has to be paid off, or the lender behind it has to agree to sit behind the new first loan. That agreement is called subordination, and it is the sponsor’s call, not yours.
Here is how it plays out in practice:
- A grant has nothing to subordinate. Refinance whenever the first-lien math works.
- A forgivable or repayable second has to be paid or re-subordinated. If the holder declines, you pay it off or you don’t refinance.
- USDA first liens add a hard rule. Down payment assistance loans and silent seconds can’t be rolled into a new guaranteed refinance. They have to be subordinated to the new loan or paid in full.
Public programs show how this works in the real world. That is one agency’s rule, not a national standard. But the pattern is common: refinancing is something you ask permission for.
So if you plan to refinance when your first-lien terms improve, ask about subordination before you sign. A buyer who intends to refinance within a few years should weigh the grant more heavily than the second-lien options. A buyer with no refinance plans gives the second liens a fairer look.
Where the General Rule Breaks
The trigger rules above hold for most files, but several edge cases change the answer. These are the ones that surprise buyers.
“Grant” can mean a loan in disguise. Some programs outside this network label a forgivable lien a grant. Ask one question: is there a note and a recorded lien? If yes, it’s a loan until the schedule completes.
Occupancy is a condition, not a formality. All four options are for an owner-occupied primary residence only. Renting the home out, or moving out and keeping it, can break the terms on the second-lien options. A grant carries no lien, but it was released on the premise that you would live there.
HUD-184 is a first lien, not an assistance program. The Section 184 guarantee does not itself provide down payment assistance. Any assistance comes from a tribe, a tribally designated housing entity, or another third party, and that provider sets the repayment terms. The forgivable and repayable options in the wholesale network can pair with an HUD-184 first, but lien priority is one item for your lender and the assistance provider to confirm on your file.
State bond programs add their own layer. Some state housing finance programs, funded with tax-exempt bonds, carry recapture rules for early sales. That is separate from the DPA second. If your assistance comes through a state program rather than a wholesale option, ask about both.
Hardship policies exist but vary. Some agencies publish partial-forgiveness policies for narrow situations. These are agency-specific, and you should confirm them in writing rather than assume.
Nothing stacks. None of the four options can combine with another assistance program, and a mortgage credit certificate is not permitted with the second-lien options. Stacking isn’t a workaround for a trigger you dislike.
A Buyer Scenario, Told in Payments
Picture three buyers who all buy a primary residence with an FHA first lien. Each hits the same life event: a job relocation after two years.
Buyer one used the grant. The home sells. No lien needs a release, no payoff line appears for assistance, and the sale proceeds follow the usual closing math. The grant simply isn’t part of the transaction.
Buyer two used the 36-payment forgivable second. Two years is 24 payments, so the schedule isn’t complete. The unforgiven balance is a payoff item at closing, and the lien needs a release. Had the same buyer made it past 36 on-time payments, the lien would have been forgiven first.
Buyer three used the repayable second. The second pays off at the sale like any other mortgage balance. Two years of monthly payments reduced it only a little, so a large share of the original assistance is still owed.
Now change one fact. Suppose buyer two never moves but wants to refinance after month 20. The forgivable lien needs a payoff or a subordination approval. Waiting until forgiveness completes would avoid the question entirely, though that depends on whether the first-lien terms are worth the wait.
Same buyers, same event. Three different outcomes at the closing table, all because of the legal form.
What the Lender Looks for First
Underwriting treats the first lien and the assistance as two separate files that have to fit together. The first lien is a normal FHA mortgage: 3.5% minimum investment, 96.5% first-lien leverage, and an upfront mortgage insurance premium financed into the loan. Annual mortgage insurance varies by loan size and leverage tier. FHA’s 2026 one-unit loan limits run from $541,287 to $1,249,125 by county.
The assistance is then layered on. Here is how each shape shows up in underwriting:
- Grant: counted toward the minimum investment. Income or category is verified, and the education certificate goes in the file.
- Forgivable second: no payment is added to your debt-to-income. Credit floors apply, and the second lien needs its own documents.
- Repayable second: the payment is counted in your ratios. Automated underwriting must approve the combined file.
On the second-lien options, a lower-scoring co-borrower’s score can be averaged in when the primary wage earner brings in at least 60% of household income and holds the higher score. Property types also matter: single-family detached or attached, condominium and PUD qualify for the second-lien options. Minor non-structural repairs up to $5,000 can be escrowed at 150% of the estimate, with the completion timeframe varying by file and lender.
All of this is arranged through wholesale lenders and is subject to program guidelines and full underwriting. Nothing here is a commitment to lend.
Before You Sign: A Short Checklist
Ask for each of these in writing, and read them before closing day:
1. Is there a lien? If the answer is no, you have a grant. If yes, you have a loan.
2. What is the forgiveness schedule? Ask for it year by year, or payment by payment.
3. What events call the balance due? Sale, refinance, payoff, move-out, rental use.
4. Will the holder subordinate? And under what conditions?
5. Is there a shared-appreciation clause? Some programs outside this network require it.
6. What does the payoff look like at closing? You want to know the lien release process before you need it.
7. How long do you expect to stay? A short horizon pushes toward the grant. A long one makes forgivable seconds more attractive.
An HUD-certified housing counselor can walk through these with you at no pressure. Counselors are a sensible resource for local program questions.
Key Terms Defined
Grant: assistance released at closing with no lien, no payment and nothing to repay.
Forgivable second: a second mortgage lien that is forgiven after a set number of on-time first-lien payments.
Repayable second: a second mortgage lien with interest, monthly payments and a balloon due in year 10.
Subordination: the holder’s agreement to let its lien sit behind a new first mortgage after a refinance.
Balloon: a lump-sum payoff of the remaining balance at the end of a set term.
Recapture period: the window during which an early sale or refinance can make assistance repayable.
Lien release: the recorded document showing a second lien has been paid or forgiven.
Choosing Between Them
The right shape depends on your situation, and the tradeoff isn’t the same for everyone.
- If you qualify on income or category and want the least to track, the grant leaves nothing to monitor afterward. The cost is eligibility: you need to fit the 140% test or a category, and funds can run out.
- If you don’t fit the grant but can’t find the cash, the forgivable second adds no payment and no interest. The cost is a lien that restricts a sale or refinance until forgiveness completes.
- If you want the largest assistance and closing-cost help, the repayable second at 5% does that. The cost is a monthly payment and a year-10 balloon, so it needs a plan.
If you expect to move or refinance within three years, lean toward the grant. If you plan to stay five or more years, the forgivable second becomes much more attractive. Most buyers fall between those poles, which is why the note matters more than the headline.
Next Step
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.
Frequently Asked Questions
If I stay in the home, can I still owe the forgivable second?
Yes, in some cases. A refinance of the first mortgage can call the second due even if you never move. Missing first-lien payments by 90 days or more can also interrupt forgiveness. Staying put and paying on time through the 36 or 60 payments is what earns forgiveness.
Do I owe anything on the grant if I sell right after closing?
No. The grant option leaves nothing to repay and no lien on the property, so a sale triggers no assistance payoff. The grant was released at closing with the expectation that you’d live in the home as your primary residence. Eligibility is verified before closing, not after.
Does a repayable second come due if I refinance?
Yes, unless the holder agrees to subordinate. The second is a normal loan, so a refinance either pays it off or needs the holder’s approval to stay behind the new first lien. Either way, the balloon in year 10 forces a payoff if neither of those happens first.
Do I have to be a first-time buyer for any of these?
No. Repeat and move-up buyers qualify for all four options. The first-time-buyer definition is only one of several qualifying categories for the grant. The second-lien options have no income limit beyond USDA’s own on a USDA first lien.
Can I use these on a rental or second home?
No. Down payment assistance is for an owner-occupied primary residence only. A property used as a rental, vacation home or investment doesn’t qualify, and the options can’t be paired with another assistance program.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. Down payment assistance options are arranged alongside FHA, USDA and HUD-184 first liens through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. FDIC Affordable Mortgage Lending Guide – HFA Down Payment Assistance
2. HUD FHA Connection – Secondary Financing Background
This article is part of Lendmire’s First Time Home Buyer series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Is a Grant Forgiven Differently Than a Forgivable Second Mortgage? · Repayable Second Mortgage Terms Across Down Payment Assistance Types · Does Down Payment Assistance Have to Be Paid Back?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.