The Quick Read: The honest answer is that “first-time-only” is a feature of some programs, not a rule of FHA, USDA or HUD-184 mortgages. None of the assistance options Lendmire arranges requires a first-time buyer. The grant-style option has an income test, with several ways around it. The two second-lien options have no income cap of their own, but they are loans you repay or earn forgiveness on. Which one fits depends on your income, your credit score and how you feel about a second lien.
Plenty of buyers assume a prior home disqualifies them. Often it doesn’t. Below is how each option works, side by side, and who each suits.
Who Each Option Is Really For
Think of two camps. The first is the grant: money toward your FHA minimum investment that you never repay. The second is the second lien: a separate loan stacked behind your first mortgage, either forgivable or repayable.
The grant suits buyers with moderate income or a qualifying job or location. It also suits buyers who want no second loan at all. The second liens suit repeat buyers with higher income, because the grant’s income test doesn’t apply to them. They ask for a higher credit score in return.
Many public programs do restrict help to first-time buyers. If you’ve seen that, you’ve seen a program rule, not a law of the first mortgage. HUD’s first-time homebuyer definition is a three-year lookback: no ownership in a principal residence in the three years before purchase. Many programs borrow a version of it. None of the options below needs it to pass.
Side-by-Side
Here is how the three main shapes compare across the wholesale programs Lendmire places files with. All of them are for an owner-occupied primary residence only, subject to program guidelines and full underwriting. (A fourth shape, a refinance-cost second, covers FHA refinances and is outside this comparison.)
| Factor | Grant | Forgivable second | Repayable second |
|---|---|---|---|
| Repayment | Nothing to repay | Forgiven after 36 or 60 on-time payments | Repaid; balloon in year 10 |
| Size | 2% or 3.5% of price | 3.5% of price or value | 3.5% or 5% of price or value |
| Credit floor | 620 | 640 | 660 |
| Income test | 140% of area median, unless a category applies | None of its own | None of its own |
| First liens | FHA only | FHA, USDA, HUD-184 | FHA, USDA, HUD-184 |
| Counseling | Homebuyer education required | Not required | Not required |
| Lien on the home | None | Yes | Yes |
Two notes on that table. The credit floors are for the lowest representative score among borrowers. The two second-lien options also allow blended scores in some cases, which helps when one co-borrower has a weaker score. On a USDA first mortgage, USDA’s own income limits still apply.
When the Grant Is the Better Fit
The grant fits when you want nothing to repay and the rules match your situation. It is released at closing. There is no lien, no interest and no monthly payment.
The 620 credit floor is the lowest of the three. That matters if your score is solid but not strong. The grant also pairs with several FHA products, including FHA 203(b), repair escrow, and the limited and standard 203(k) renovation loans, at 96.5% loan-to-value.
The income test looks strict but has a lot of exits. Your household income can sit at or below 140% of the area median. Or you can qualify through a category instead. Those categories include:
- first responders
- educators
- medical personnel
- civil servants
- military personnel
- first-time buyers
- buyers purchasing in an underserved census tract
So a repeat buyer who teaches, nurses, serves or buys in the right tract can use the grant without meeting the income test. That surprises people. Plenty of repeat buyers also land under the income line on their own.
The tradeoffs are real. The grant needs an HUD-approved homebuyer education course. You pay for it up front and the cost is credited back at closing. It doesn’t combine with FHA High Balance, so it won’t suit a buyer in a high-cost county who needs a larger loan. It also can’t be used in Washington. And it only works with FHA, not USDA or HUD-184.
Here’s the catch for repeat buyers: the grant is a modest percentage of price. If you’re moving up and need far more cash than that, it may help but not solve the problem.
When the Second Lien Is the Better Fit
A second lien fits when the grant doesn’t: income too high, no qualifying category, a USDA or HUD-184 first mortgage, or a larger loan that needs a high-balance first lien. Remember, it is a loan, and you should treat it as one.
The forgivable second carries no interest and no monthly payment. It is 3.5% of the lesser of price or appraised value. If you make your first 36 or 60 first-mortgage payments on time, with no 90-day-or-worse delinquency, the second is forgiven. Credit floor is 640. It allows manual underwriting and has no counseling requirement. It is limited to one- and two-unit homes.
Buyers like this one because the monthly budget stays clean. But the lien exists until forgiveness. Sell or refinance during that window and you should expect to deal with it. Read the note before you sign.
The repayable second is a real second loan. It is 3.5% or 5% of the lesser of price or value. It carries interest, a monthly payment, a 30-year amortization and a balloon due in year 10. At 5%, it also covers closing costs and prepaid items. At 3.5%, it covers the FHA minimum investment. High-balance first liens are allowed, and credit floor is 660. Manual underwriting isn’t an option.
That monthly payment counts in your debt ratios, so it can reduce how much house you qualify for. The CFPB also warns that borrowing a down payment adds to your overall debt and monthly payments. Honestly, this one is for buyers who have the cash flow to carry it and a plan for the year-10 balloon (usually a sale or refinance).
State housing finance agency assistance generally falls into the same family of structures: forgivable grants, zero-interest deferred seconds and full-interest amortizing seconds. That’s the landscape you’re shopping in.
Where Both Options Overlap
A few rules apply no matter which shape you choose.
- Primary residence only. No second homes, vacation homes or rentals.
- No stacking. You can’t combine one option with another assistance program. A mortgage credit certificate isn’t permitted with the second liens.
- A real first mortgage underneath. FHA means a minimum investment and first-lien leverage set by FHA rules. Upfront and annual mortgage insurance also apply; a qualified local lender or housing counselor can confirm the specifics. FHA one-unit loan limits for 2026 vary by county.
- Underwriting stays individual. Each option is reviewed against its own underwriting requirements, and a qualified local lender can confirm which requirements apply to the option you choose. Programs change, so confirm current terms.
FHA rules themselves live in HUD’s Handbook 4000.1, the document lenders follow.
Three Quick Scenarios
These use percentages only, as modeled examples.
The lapsed owner. You sold a home more than three years ago and have rented since. You likely meet the three-year first-time test, which is one of the grant’s qualifying categories. Income may not even matter. Credit at 620 or better opens the grant.
The move-up teacher. You own now, earn above the area-median line, and teach. The educator category waives the income test. The grant can work, provided you pair it with an FHA first lien at normal loan limits.
The higher-income repeat buyer in a high-cost county. No qualifying category, income above the line, and the loan needs a high-balance first lien. The grant is out. The repayable second allows high-balance first liens, but needs a 660 score and room in your ratios for the payment.
If you’re moving up, one practical point: plan your sale and your purchase together. Assistance is for the new primary residence, so the timing of selling the old one matters to the file.
Which One Should You Pick?
This is closer than it looks. The grant is cheaper over time, since nothing is repaid, but it has the narrowest fit: FHA only, no high balance, a counseling course and an income-or-category test. The forgivable second is the middle road, with a clean monthly budget in exchange for a lien and a multi-year wait. The repayable second is the most flexible on loan size and first-lien type, and the most demanding on your budget and credit.
A fair rule of thumb: start with the grant if you qualify. Move to the forgivable second if you want no payment but miss the grant’s rules. Use the repayable second when size or loan type forces it, and only when the monthly payment and balloon fit your plan.
Key Terms Defined
Representative credit score: the middle score of each borrower, with the lowest one used for the file.
Second lien: a loan secured by your home that sits behind your first mortgage.
Balloon: a large lump-sum payment due at the end of a loan’s short term, here in year 10.
Area median income (AMI): the middle household income for your county or metro, used to set income limits.
Blended score: an averaged credit score that can include a lower-scoring co-borrower, in limited cases.
Frequently Asked Questions
Do I have to be a first-time buyer to get down payment assistance?
No. None of the options Lendmire arranges requires it. First-time status is one of several qualifying categories for the grant, not a rule for any option. HUD’s definition is a three-year lookback, and many public programs use a version of it. Check each program’s own wording.
Can I use assistance if I still own a home?
Yes, on a new owner-occupied primary residence, subject to program guidelines. The assistance is for an owner-occupied primary residence only, so it can’t go toward a rental, an investment property or a second home. Because you’ll have a home to sell or keep, timing matters, and lenders will count your obligations.
Is the grant really free of repayment?
It has nothing to repay: no lien, no interest, no payment. The forgivable second is different. It is a lien that is forgiven only after on-time payments. Some public “grants” elsewhere carry recapture rules, so read the document before signing.
Do the second-lien options have income limits?
Not their own. A USDA first mortgage brings USDA’s income limits with it. The grant has the 140% of area median income test unless you fit a qualifying category.
What happens if I sell or refinance later?
A grant has nothing to pay back. A forgivable or repayable second is a lien, so a sale or refinance generally requires dealing with it. A repayable second also comes due at the year-10 balloon. USDA also requires an assistance lien to be subordinated or paid off in a guaranteed refinance.
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. You can also read about down payment assistance programs in more detail.
Investors who want the broader program framework can review how DSCR loans work.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps home buyers in 16 states pair an FHA, USDA or HUD-184 first lien with a down payment assistance option arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD HOC Reference Guide – First-Time Homebuyers
2. CFPB – Where can I get money for a down payment
This article is part of Lendmire’s down payment assistance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Which Down Payment Assistance Programs Are Still Funded in 2025? · Do First Responders and Teachers Qualify for Down Payment Assistance? · Do You Have to Be a First-Time Buyer to Get Down Payment Assistance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Legal disclosures. Lendmire (NMLS# 2371349) is a state-licensed mortgage brokerage that arranges financing through wholesale lender relationships. Lendmire is not a direct lender, depository institution, or registered financial advisor. The discussion above is general informational content about real estate financing — it is not financial, legal, or tax advice, and readers should consult licensed professionals for guidance on their individual circumstances. Loan inquiries are subject to lender underwriting; this article does not represent a commitment to lend. Loan terms, rates, and qualification standards vary by borrower, property, and state, and are subject to change at any time. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.