The Quick Read: A grant is the only one of the three with nothing to repay and no lien on your home. A forgivable second is a loan that disappears if you make your first-mortgage payments on time for a set period. A repayable second is a real loan with a monthly payment and a balloon due in year 10. Which one fits depends on your income, your credit score, and how long you plan to stay.
Here is the honest answer on who each one is for. The grant suits buyers who qualify on income or a category and want the cleanest ownership picture. The forgivable second suits buyers who need more flexibility on credit or income and plan to stay at least three to five years. The repayable second suits buyers who need the most help, including closing costs, and can carry another payment.
All three come from the same kind of program, and all three apply only to an owner-occupied primary residence. Not a second home. Not a rental. And nobody has to be a first-time buyer. Repeat and move-up buyers qualify across the board.
Across the wholesale programs Lendmire places files with, the choice among these shapes decides more about your next ten years than the size of the assistance does. Lendmire is a mortgage broker licensed for consumer lending in 16 states, so everything below describes how these options work through wholesale lenders, subject to program guidelines and full underwriting. You can see the broader menu on Lendmire’s down payment assistance programs page.
Side-by-Side
| Factor | Grant | Forgivable Second | Repayable Second |
|---|---|---|---|
| Amount | 2% or 3.5% of price | 3.5% of lesser of price or value | 3.5% or 5% of lesser of price or value |
| Repayment | Nothing to repay | Forgiven after 36 or 60 on-time payments | Repaid; balloon in year 10 |
| Lien on your home | None | Second lien | Second lien |
| Monthly payment | None | None | Yes, 30-year amortization |
| Credit floor | 620 | 640 (660 blended) | 660 (670 blended) |
| Income test | 140% of area median, unless a category applies | None beyond USDA’s own on a USDA loan | None beyond USDA’s own on a USDA loan |
| First-lien pairing | FHA only | FHA, USDA, HUD-184 | FHA, USDA, HUD-184 |
| Counseling | HUD-approved course required | Not required | Not required |
| Units | 1-4 | 1-2 | 1-2 |
| Manual underwriting | Follows AUS finding | Allowed | Not allowed |
One detail in that table deserves a closer look. The repayable second can cover closing costs at the 5% level, which neither of the other two does.
What Each Shape Actually Is
A grant is money toward your FHA minimum investment that is released at closing. No lien is recorded. No payment is added. Nothing accrues. The lender still documents where the funds came from, and the homebuyer education course is a real requirement, not a formality.
A forgivable second is a loan, and it is worth saying so plainly. It carries no interest and no monthly payment. It is forgiven in full after the first 36 or 60 on-time first-lien payments, and a delinquency of 90 days or more breaks that. Leave or sell before then, and the balance can come due.
A repayable second is a loan in the ordinary sense. It carries interest, a monthly payment, and a 30-year amortization schedule with a balloon due in year 10. It also has its own Loan Estimate-style disclosure and a separate balloon disclosure, because it is a consumer loan in its own right.
The FDIC’s Affordable Mortgage Lending Guide describes the same three-way mix in public programs: forgivable grants, zero-interest deferred seconds, and amortizing second loans. It also notes that grant money can run out faster than loan money, because loan repayments replenish the pool. That is one reason a program may steer you toward a particular shape.
Who Qualifies for Which
The grant is the one with an income test. Your household income must be at or below 140% of the area median income, unless a qualifying category applies. Those categories are broad:
- First responders, current, former, or entering service
- Educators
- Medical personnel, including nurses, doctors, and hospital workers
- Civil servants at the federal, state, or local level
- Military personnel, current, retired, volunteer, or unpaid
- First-time buyers, meaning no ownership interest in a residence in the prior three years
- Buyers purchasing in an underserved census tract
Meeting any one of those opens the grant even if your income is above the limit. A repeat buyer who teaches school, for example, can qualify without ever being a first-time buyer.
The two second-lien options carry no income limit beyond USDA’s own on a USDA first mortgage. That is a real advantage for a household that earns too much for the grant and does not fit a category. The tradeoff is a higher credit floor.
Credit scores work a little differently on the seconds. A lower-scoring co-borrower’s score can be averaged into a blended score when the primary wage earner brings in at least 60% of household income and holds the higher score. The blended minimums are 660 for the forgivable second and 670 for the repayable one, and an automated underwriting approval is required.
When the Grant Is the Better Fit
The grant is the better fit when you qualify for it, because nothing else on this list is as simple. There is no lien to track, no forgiveness clock, and no balloon. You close, and the assistance is done.
It fits best in a few situations:
- Your score sits in the low-to-mid 600s. The 620 floor is the lowest of the three.
- You qualify through a category. An educator or nurse moving up from a starter home can use it with no first-time-buyer test.
- You may move or refinance sooner than five years. With no lien, there is nothing to pay off at sale and nothing to subordinate later.
- You want your monthly budget untouched. The grant adds no payment and no new debt.
The catches are real, though. The grant pairs with FHA first liens only, so USDA and HUD-184 buyers are out. It covers a smaller slice, 2% or 3.5% of the price. The homebuyer education course is required, and you pay for it up front, with the cost credited back at closing. And it cannot be combined with another assistance program, FHA High Balance, or several other FHA variations.
One more point on the word “grant.” Consumer explainers like RealCostIQ warn that some programs call money a grant when it is really a forgivable loan. The test is simple: ask whether a lien gets recorded and whether anything can ever come due. With the grant option described here, the answers are no and no.
When the Forgivable Second Is the Better Fit
The forgivable second is the better fit when you miss the grant’s tests but plan to stay put. It has no income limit beyond USDA’s own, it carries no interest, and it asks for no monthly payment. After 36 or 60 on-time payments on your first mortgage, it is forgiven in full.
It tends to work for these buyers:
- Households earning above the grant’s income test who do not fit a qualifying category.
- Buyers using USDA or HUD-184. The forgivable second pairs with both, along with FHA.
- Buyers who need manual underwriting. Among the three assistance shapes, this one is often the option that allows it.
- Buyers who plan to stay at least three to five years. Forgiveness rewards patience.
Think of it as a loan with a built-in discount for staying. Picture a buyer who expects a job transfer in two years. Selling before the forgiveness period ends means the balance may come due out of the sale proceeds, which trims equity. The same buyer on the grant owes nothing at sale. That gap is the hidden cost of the forgivable shape.
There is also a refinance wrinkle. Existing down payment second liens cannot simply be rolled into a new guaranteed refinance. They must be paid off or subordinated again, according to USDA’s origination FAQ. If you might refinance within the forgiveness window, plan for that step.
The forgivable second also covers fewer units than the grant. It stops at one-to-two-unit properties, and it works on single-family homes, condominiums, and planned unit developments, with unique property types excluded.
When the Repayable Second Is the Better Fit
The repayable second is the better fit when you need the biggest boost, or when the other two simply are not available to you. It is often a strong option that reaches 5% of price or value, and at that level it also covers closing costs and prepaid items. That is 3.5% for the minimum investment plus 1.5% toward closing costs.
It makes sense for buyers in these spots:
- Thin savings, solid income. If cash to close is the barrier, covering closing costs matters as much as the down payment.
- Buyers who need a high-balance first lien. The repayable second allows one; the grant and forgivable second do not.
- Buyers who can absorb a second payment and still meet qualifying ratios.
- Buyers who expect to sell or refinance within ten years. The balloon in year 10 is the date to plan around.
The costs are plain. You carry a monthly payment on top of the first mortgage, and that payment counts in your qualifying ratios. The credit floor is the highest, at 660 (670 blended). Manual underwriting is not allowed. The second has no lender fees, only prepaid interest and recording, settlement, and registration charges. And it comes with its own disclosures, including a balloon disclosure, which you should read as carefully as the first mortgage paperwork.
How the payment gets counted matters, and rules differ by loan type. Rates are not quoted here, but the structure of a second changes how a lender sees your budget.
A Fourth Shape Worth Knowing
There is a refinance version of the repayable second. It covers 1% to 3.5% of the lesser of your current first-lien balance or appraised value toward the closing costs of an FHA 203(b) refinance. Combined leverage can reach 104%. It carries the same repayment terms as the repayable second, and it cannot be used on a streamline refinance or to refinance an existing assistance loan. It needs a 660 score (670 blended).
What They All Sit On
Every option here sits beneath a government first mortgage, so the first lien’s own rules still apply. On an FHA loan, the minimum required investment is 3.5% of the lesser of price or appraised value, for a representative score of 580 or higher. An upfront mortgage insurance premium is charged on the base loan and can be financed. Annual mortgage insurance applies on top, and it varies by loan size and leverage. The assistance options carry their own, higher credit floors above the FHA minimum.
FHA also limits how much you can borrow. The 2026 one-unit FHA loan limits run from $541,287 to $1,249,125, depending on the county. Check your county’s limit before you shop.
State and local programs often provide down payment help that can be paired with an FHA loan. The key word is “paired.” The first mortgage stays in first position, and the assistance sits behind it or beside it.
None of these options stacks with another assistance program. A mortgage credit certificate is also not permitted with the second-lien options. If you are eyeing a city or state program on top, that will not combine here.
Picking Between Them
This is a genuine judgment call, and the right answer changes with your situation. A few rules of thumb:
1. Check the grant first. If you qualify on income or a category, and your first lien is FHA, it is hard to beat nothing to repay.
2. If the grant is out, ask how long you will stay. Three to five years or more points to the forgivable second.
3. If cash to close is the real problem, the repayable second at 5% is the only shape that also covers closing costs.
4. If your score is the problem, the grant’s 620 floor is the lowest; the forgivable second needs 640; the repayable second needs 660.
5. If you want USDA or HUD-184, the grant is off the table, since it pairs with FHA only.
The stronger play for many buyers is the grant when eligible, with the forgivable second as the backstop. But a buyer who needs closing-cost help and can handle the payment could reasonably argue for the repayable second. Neither answer is wrong.
Be honest with yourself on one more point. Assistance is not always the right call. If the second payment would stretch your ratios thin, or you may sell within a year or two, borrowing a little more cash from savings may beat taking on a lien. Nothing about these programs makes them a good idea for every file.
Key Terms Defined
Second lien: A loan recorded behind your first mortgage. If the home is sold, the first mortgage gets paid before the second.
Balloon: A lump-sum payment due at the end of a set period. On the repayable second, it comes due in year 10.
Forgiveness period: The stretch of on-time payments, 36 or 60 months here, after which a forgivable second is written off.
Blended score: A credit score that averages in a lower-scoring co-borrower when the primary earner meets certain conditions.
Area median income: The middle household income for your local area, used to set the grant’s income test.
AUS: Automated underwriting system, the software that most loan files must run through before approval.
Frequently Asked Questions
Do I have to pay back down payment assistance?
It depends on the shape. The grant has nothing to repay. The forgivable second is forgiven after 36 or 60 on-time first-lien payments, but can come due if you sell or fall seriously behind first. The repayable second must be repaid, with a balloon due in year 10.
Do I have to be a first-time buyer?
No. None of these options requires it. Repeat and move-up buyers qualify. The grant’s income test is set at 140% of area median unless a category applies, and the two second-lien options have no first-time requirement at all.
Can I use assistance on a rental or second home?
No. Assistance is for an owner-occupied primary residence only. Vacation homes, second homes, and rental properties are not eligible.
Does a second with no payment still matter for approval?
Yes. The forgivable second adds no monthly payment, but it is still a loan and a lien. It counts toward your combined leverage, and the lender underwrites the file with it in place. Underwriting is individual, so program guidelines and your full file decide the outcome.
Can I combine two assistance programs?
No. Nothing here stacks with another assistance program, and a mortgage credit certificate is not allowed with the second-lien options.
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. Programs change, and approval is not a commitment to lend.
Investors who want the broader program framework can review how DSCR loans work.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Lendmire arranges FHA, USDA and HUD-184 purchase loans with down payment assistance options through wholesale lenders; every file is underwritten by the lender under the applicable program guidelines. 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 programs
2. RealCostIQ – Down payment assistance guide
3. USDA Rural Development – Single Family Guaranteed loan origination FAQ
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: Does a DPA Second Count Against DTI for High Earners With Student Debt? · Who Must Occupy and Who Must Take the Class on a DPA Loan? · Does a Forgivable Grant Count Against Your DTI on a DPA Loan?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.