The Quick Read: No. Government agencies fund and run most down payment help, but nonprofits, employers and lenders also supply it, and the first mortgage you choose decides which sources it will accept. Some programs are grants, some are forgivable loans, and some are repayable second loans. Each one has its own rules, so the real question is which source fits your first mortgage.
Who Else Offers Down Payment Help Besides the Government?
Most programs come from public bodies, but not all of them. Municipal governments, nonprofits and state housing finance agencies run the large majority of programs. Down Payment Resource and Urban Institute research put that share at 82.2 percent. The same research lists state housing corporations, employers and tribal organizations among the other providers. The data is a few years old, so read it as a pattern, not a count.
Here is how the provider types compare.
| Provider | Who funds it | Common shape | Typical catch |
|---|---|---|---|
| State or local agency | Public money | Grant or second loan | Approved lenders, income tests |
| Nonprofit | Donations, public funds | Grant or second loan | Lender and loan-type limits |
| Employer | The employer | Cash toward costs | Set by the employer |
| Lender or broker network | Wholesale investors | Grant, forgivable or repayable | Set by program guidelines |
The federal consumer-finance regulator says many programs offer assistance that works with an FHA loan. Note the wording: the program and the loan are separate pieces. That is where the confusion starts.
Why the “Government Only” Idea Sticks
Two reasons. First, the money often starts with a public source. Second, the person who runs a program is not always the person who funds it. A state agency may fund a program and deliver it through private lenders. A lender may deliver a program that wholesale investors fund. Buyers see a bank logo and assume private money, or see an agency logo and assume only agencies play.
The first mortgage adds to the mix. FHA does not give assistance itself. It sets rules on where the buyer’s cash may come from. USDA and HUD’s Section 184 program work the same way. They guarantee the first loan, then allow outside help under conditions.
What Each First Mortgage Allows
FHA. FHA requires a minimum investment of at least 3.5 percent of the property’s adjusted value, per the handbook glossary. That glossary names several acceptable sources: employer assistance, approved nonprofits and governmental entities. When a government body supplies those funds, FHA guidance asks for added paperwork showing the entity really had authority to give them. In practice, a state agency states it has a legal obligation to provide the funds and attaches a legal opinion, as in CalHFA’s sample pre-closing letter.
USDA. Assistance programs may be used with a USDA guaranteed loan as long as that loan stays in first lien position. The restriction is on lien position, not provider type. A soft second for down payment or closing costs gets a limited exception when total liens run past market value.
HUD Section 184. The program does not lend or give assistance. Buyers are pointed to their tribe or state housing finance agency for help. Junior liens from those sources are allowed.
The current rule text sits in HUD’s Housing Handbooks library, where Handbook 4000.1 is published. Read it there, not in a summary.
How Assistance Is Structured (and What Gets Repaid)
The wholesale programs Lendmire works with cover four shapes. Lendmire is a mortgage broker licensed for consumer lending in 16 states, and these options go through wholesale lenders, subject to program guidelines and full underwriting. For more on how they fit together, see Lendmire’s down payment assistance programs page.
Grant. Assistance of 2% or 3.5% of the purchase price toward the FHA minimum investment. Nothing to repay. It is released at closing with no lien, no payment and no interest. The credit floor is 620. It pairs with FHA first liens only, on 1-4 unit primary residences. Eligibility rests on household income at or below 140% of area median income, unless a qualifying category applies. Categories include first responders, educators, medical workers, civil servants, military personnel, first-time buyers and buyers in underserved census tracts. An HUD-approved homebuyer education course is required. It is not offered in Washington.
Forgivable second. 3.5% of the lesser of price or appraised value. No interest and no monthly payment. It is forgiven after 36 or 60 on-time first-lien payments, depending on the version. The credit floor is 640. It pairs with FHA, HUD-184 or USDA first liens on 1-2 units, with no income limit beyond USDA’s own on a USDA loan.
Repayable second. 3.5% or 5% of the lesser of price or value. At 5%, the extra 1.5% goes toward closing costs. This is a real second loan. It carries interest, a monthly payment, a 30-year amortization and a balloon due in year 10. It gets its own disclosure. The credit floor is 660. First liens are FHA, HUD-184 or USDA.
Refinance-cost second. 1% to 3.5% of the lesser of the current balance or value, toward the costs of an FHA refinance, with combined leverage to 104%. Credit floor 660.
Call the grant what it is: nothing to repay. Call the seconds what they are: loans, one forgiven over time, one repaid.
Do You Have to Be a First-Time Buyer?
No. Repeat and move-up buyers qualify across all four shapes. The three-years-without-ownership test is just one of the grant’s qualifying categories. ConsumerAffairs makes the same general point: not every assistance program is limited to first-timers, though many are.
One boundary holds across everything here. Assistance is for an owner-occupied primary residence. Second homes and rentals are out.
Can You Combine Sources?
Not within this network. No option stacks with another assistance program, and a mortgage credit certificate is not allowed with the second-lien options. The grant also cannot be paired with FHA High Balance or several other FHA variants. Pick one structure.
Employer help is a separate matter, since FHA’s glossary names it as an allowed source. Whether a given employer benefit can sit beside a specific program is a question for the lender reviewing your file.
How the Assistance Shows Up in Your File
The first loan still has to qualify on its own. FHA sits underneath at a 3.5% minimum investment, which means 96.5% first-lien leverage. It carries a 1.75% upfront mortgage insurance premium, which can be financed, plus annual premiums that vary by tier. One-unit FHA limits for 2026 run from $541,287 to $1,249,125 by county.
The structure you pick changes the file.
- Grant: no new payment and no lien. The file needs the education certificate and proof of income or a qualifying category.
- Forgivable second: no payment, but a lien sits on title until forgiveness. A 90-day-plus delinquency during the forgiveness window breaks it.
- Repayable second: a second payment that lenders count in the ratios. On USDA files, Chapter 11 of the USDA handbook counts subordinate lien payments in housing expense against the 29 percent ratio. The repayable second does not allow manual underwriting, so the automated finding has to come back approved.
The credit floors are the first hard stop. A 640 score clears the forgivable second but not the repayable one. If a co-borrower pulls the representative score down, blended scoring can help on the second-lien options, but only when the primary wage earner brings in at least 60% of household income and holds the higher score.
Which Source Fits Which Buyer?
Picture a renter with thin savings and a 640 score buying a condo. The forgivable second fits the credit floor and carries no payment. The grant would need 620, which also clears, but then income at or below 140% of area median income or a category must apply.
Say a nurse with a decent score and mid-size savings wants the grant. A medical worker is a qualifying category, so the income test falls away. The education course is the main to-do.
Consider a repeat buyer selling one home to buy another with a 670 score. The repayable second works if they need closing-cost help too, because at 5% it covers costs as well. They need to be comfortable with a balloon in year 10.
Run the numbers on a rural buyer using a USDA-backed first lien. The forgivable and repayable seconds both pair with that first lien. The combined loan can run above market value only through a soft second.
Key Terms Defined
Minimum required investment: the cash or equivalent an FHA borrower must put in, at least 3.5 percent of the adjusted value.
Soft second: a second loan with no payment or a deferred payment, often forgiven over time.
Balloon payment: the full remaining balance of a loan, due at one set point.
Combined loan-to-value: all liens on the home added together, divided by the home’s value.
Area median income: the middle household income in your county, used for grant income tests.
Housing counselor: an approved advisor who explains programs and your options.
Common Mistakes
- Assuming any lender can use any program. State agency programs usually require approved lenders, and wholesale options go through the network that carries them.
- Treating a second lien as a gift. A repayable second is a loan with a balloon.
- Skipping the education course on the grant. It is required.
- Picking a loan before checking provider rules. Match the assistance to the first mortgage first.
- Assuming funding stays open. Programs can run out of money and reopen.
An HUD-approved counselor is a free way to cross-check any of it.
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. Reach the team at 828-256-2183.
Frequently Asked Questions
Is down payment assistance only available through government programs?
No. Public agencies run most programs, but nonprofits, employers and wholesale lender networks also offer help. A program can be delivered by a private lender and still be funded in part by public money, which is why the source is hard to tell from the logo.
Does FHA itself give down payment assistance?
No. FHA insures the first mortgage and sets the 3.5% minimum investment. It also lists which sources may supply that money, including employers, HUD-approved nonprofits and governmental entities. The assistance comes from a separate provider.
Does the assistance have to be paid back?
It depends on the shape. The grant option has nothing to repay. The forgivable second is forgiven after 36 or 60 on-time first-lien payments, depending on the version. The repayable second is a loan with a monthly payment and a balloon in year 10. Each is subject to program guidelines and full underwriting.
Do I have to be a first-time buyer?
No. None of the options requires you to be a first-time buyer, so repeat and move-up buyers can qualify. The grant has an income test of 140% of area median income unless you fall into a qualifying category. The grant also requires a 620 credit score, an FHA first lien and homebuyer education. The second-lien options carry no income limit beyond USDA’s own on a USDA loan. Exact terms depend on lender guidelines, credit profile and property review.
Can I use assistance on a rental or second home?
No. Every option here 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.
Investors who want the broader program framework can review how DSCR loans work.
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References
1. Down Payment Resource and Urban Institute chartbook
2. CFPB, special loan programs
3. USDA Rural Development loan origination FAQ
This article is part of Lendmire’s down payment assistance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Down Payment Assistance Changes Your Monthly Payment · Can Any Lender Offer Down Payment Assistance? · Does Down Payment Assistance Only Work With FHA Loans?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.