The Quick Read: Your file faces two sets of tests, not one. The first-mortgage rules (FHA, USDA or HUD-184) come first. The assistance option then adds its own income, credit and property checks on top. The stricter rule wins, so passing one layer does not carry you through the other.
Two Layers, Three Screens
The assistance option never replaces the first mortgage’s underwriting. It sits on top of it. A lender reviews your income, your credit and the property’s location against the first-lien rules, then again against the assistance rules.
Lendmire is a mortgage broker. It arranges FHA, USDA and HUD-184 first mortgages, paired with grant, forgivable and repayable assistance, through wholesale lenders. The sections below show how those programs screen a file. Other down payment assistance programs differ in their details, so treat this as the pattern, not a promise. Everything is subject to program guidelines and full underwriting.
- Two layers apply: the first lien and the assistance option. The tighter limit on any screen controls.
- You do not have to be a first-time buyer. Repeat and move-up buyers qualify.
- The assistance is for a primary residence you will live in. Second homes and rentals are out.
- The property’s address is screened as hard as your paycheck.
- A forgivable or repayable second is a loan. The grant is the one with nothing to repay.
The Four Shapes, Briefly
The screening makes more sense once you know what is being screened. The programs Lendmire places files with come in four shapes:
- Grant: 2% or 3.5% of the price, nothing to repay, released at closing.
- Forgivable second lien: 3.5% of the lesser of price or appraised value. It has no interest and no payment. It is forgiven after 36 or 60 on-time first-lien payments.
- Repayable second lien: 3.5% or 5% of the lesser of price or value. It carries interest and a monthly payment. It amortizes over 30 years with a balloon due in year 10.
- Refinance-cost second lien: 1% to 3.5% of the balance toward the costs of an FHA refinance.
Each shape has its own credit floor and its own list of first liens it pairs with. Those differences drive most of the screening.
The Screening Sequence, Step by Step
Here is the order a file usually moves through. Borrowers tend to get stopped at the same few points.
1. Pick the first lien. FHA, USDA or HUD-184. The agency’s rules govern that loan, and the assistance does not bend them.
2. Match the assistance to that first lien. The grant pairs with FHA first liens only. The forgivable and repayable seconds also pair with USDA and HUD-184.
3. Run the income screen. The lender counts qualifying income for the first loan. Then it checks any income test the assistance option adds.
4. Run the credit screen. The lender pulls the representative score, which is the middle of three bureau scores. It tests that score against the first lien and against the assistance floor.
5. Run the location screen. The address must fit the first lien’s geography and any geography the assistance option sets.
6. Count the liens. A second lien adds to combined leverage. A grant does not create a lien.
7. Collect the paper. That means income, assets and employment records, plus a homebuyer education certificate for the grant.
8. Get the underwriting finding. Automated underwriting (AUS) is the software that rates your file. Most of the assistance options follow its finding.
Notice what comes late: your money in the deal, the property type and the paperwork. Most files that fail do so at steps 3 through 5.
Income Screening: Which Paycheck Counts
Income gets tested in two different ways, and buyers often mix them up. One test asks whether you earn too much. The other asks whether you earn enough.
The “too much” test. The grant is often a strong option here with an income ceiling. Your household income must be at or below 140% of the area median income, unless you fall into a qualifying category. Those categories are:
- first responders
- educators
- medical personnel
- civil servants
- military personnel
- first-time buyers
- buyers purchasing in an underserved census tract
Any one is enough. The forgivable and repayable seconds carry no income limit of their own. The one exception is a USDA first lien, which brings USDA’s own limit. USDA’s program page describes that cap as a share of the area median income, tied to your primary residence and the rural location. For more on how ceilings shape who gets help, see Lendmire’s piece How Income Limits Cut Off Down Payment Assistance for High Earners.
The “enough” test. Every first lien still has to be repaid from your income. FHA manual underwriting uses 31/43 ratios, meaning housing costs and total debts as a share of income. AUS approvals commonly allow more, and the assistance options follow the AUS finding. A second lien with a payment adds to your monthly debts, so a repayable second makes this test harder.
Whose income counts. On a USDA file, the lender documents the income of every adult in the household, not just the people signing the note. That surprises buyers who plan to leave a working adult child off the loan. The “too much” test still sees that paycheck.
Credit Screening: Which Score, and Whose
Each option has a floor above the bare FHA minimum. FHA itself accepts a representative score of 580 or higher for the 3.5% minimum investment, and 10% down from 500 to 579. The assistance options sit higher. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
| Option | Credit floor | Blended score allowed |
|---|---|---|
| Grant | 620 | No |
| Forgivable second | 640 | Yes, 660 |
| Repayable second | 660 | Yes, 670 |
| Refinance-cost second | 660 | Yes, 670 |
The lowest score is the one that counts. On the grant, the lender uses the lowest representative score among all borrowers. A co-borrower with weak credit can sink a file that your score alone would clear.
Blended scores are the exception. On the second-lien options, a lower-scoring co-borrower’s score can be averaged in. The primary wage earner must earn at least 60% of household income and hold the higher score. The minimums then rise to 660 for the forgivable option and 670 for the repayable one. AUS approval is required.
Manual underwriting splits the options. The forgivable second allows manual underwriting, which helps thin-file buyers. The repayable second does not. If your file needs a human to weigh it, that difference matters.
Public programs outside this network set their own floors too. One Utah city program, for example, uses the lowest middle score among applicants and denies anything under its floor. Meeting the agency minimum does not guarantee approval when the assistance sets a higher bar.
Location Screening: Why One Street Can Differ
Credit and income move with you. The address does not. Location is where a good-looking file hits a wall.
- USDA: The property must sit in an area the agency designates as rural. The lender confirms this at origination, and maps change.
- HUD-184: The property must be in an approved area or on trust land, and the borrower must be an enrolled tribal member.
- FHA: The county sets the loan ceiling. Current one-unit FHA limits run from $541,287 to $1,249,125 by county. The grant also does not pair with a high-balance first lien.
- The grant’s tract rule: An underserved census tract is one way to qualify without the income test. The address decides, not your preference.
Property type is screened too. The grant covers one- to four-unit primary residences, FHA-approved condominiums and PUDs. A PUD is a planned unit development with shared amenities. The second-lien options are narrower: single-family detached or attached, condominium or PUD, one to two units. Unique property types are excluded.
Repairs matter. The second-lien options allow escrow holdbacks for minor non-structural repairs up to $5,000. The lender escrows 150% of the estimate, and the work is completed within a timeframe that varies by file and lender.
The Screens at a Glance
| Screen | What the lender checks | Common stumble |
|---|---|---|
| Income | Ceiling, if any, plus ability to repay | Counting income from adults off the loan |
| Credit | Lowest representative score vs. the floor | A co-borrower’s score drags the file down |
| Location | Address vs. the first lien and program map | Property sits outside the eligible area |
| Occupancy | Primary residence only | Plans to rent or use as a second home |
Other Gates That Trip Buyers
First-time status is a myth gate. Nobody has to be a first-time buyer. The three-year definition (no ownership interest in a residential property in the three years before you apply) is only one of the grant’s qualifying categories. A repeat buyer moving up qualifies like anyone else.
Occupancy is not negotiable. The home must be your owner-occupied primary residence. That rules out second homes, vacation homes and rentals. A buyer who plans to rent out the property is in the wrong program.
No stacking. No option combines with another assistance program. A mortgage credit certificate is not permitted with the second-lien options. The grant also cannot be paired with FHA High Balance, FHA $100 Down, FHA 203(h), Good Neighbor Next Door or FHA One-Time Close.
Education. The grant requires an HUD-approved homebuyer education course. You pay up front, and the cost is credited back at closing. The forgivable and repayable options carry no counseling requirement. Free HUD-approved counseling is still a smart first step if you want a neutral read on your budget. Start with the CFPB’s housing counselor search.
Washington. The grant is not offered there. The second-lien options may still apply, subject to program guidelines.
Where the General Rule Breaks
A forgivable second is not a gift. Historically, HUD treated any financing that creates a lien as secondary financing, even if it was “soft,” silent or forgiven later. A family gift creates no lien, so it is counted differently. Lien-creating assistance counts toward combined leverage. That is why a forgivable second is screened like a loan, with a credit floor of its own, while the grant creates no lien and adds nothing to combined leverage. Confirm the current rule with your lender, since the archived text is old.
Passing one USDA test does not pass the other. You can fall under the income cap and still fail repayment ability. The reverse also happens.
A forgiven second can come back. Forgiveness requires on-time first-lien payments, with no 90-day-or-greater delinquency across the 36 or 60 payments. Miss that, and the second stays a debt.
A repayable second is a real loan. It has interest, a monthly payment, a balloon in year 10, and its own disclosure. It counts against your debt load, so borrowing a down payment raises your overall debt and monthly payments.
Refinances are narrower. The refinance-cost second applies only to an FHA 203(b) refinance. It does not cover a streamline refinance. It also cannot refinance an existing assistance loan.
Taxes. Tax treatment can depend on your situation; buyers should speak with a qualified tax professional before relying on any deduction or credit.
Three Buyer Pictures
These scenarios use percentages and plain words, not dollar amounts.
The clean pass. A teacher is moving up from a condo to a house. She is not a first-time buyer, but educators are a qualifying category for the grant. Her score clears the 620 floor, the house is a single-family primary residence, and the first lien is FHA. The file runs through AUS, she completes the education course, and the grant is released at closing with nothing to repay.
The location stop. A couple wants USDA with a repayable second. Their income and credit fit. The address, though, sits just outside the designated rural area. The first lien fails on location, so the assistance never gets a vote. They either shift to an FHA first lien on a different property or keep looking inside the eligible area.
The credit fix. A buyer with a 645 score applies for the repayable second, which requires 660. The file fails there but clears the forgivable second at 640. The buyer takes the forgivable route, or pays down balances, raises the score and reapplies for the repayable one.
Run your own file through these three gates before you apply: income, credit, location.
Key Terms Defined
Area median income (AMI): The midpoint household income for a county or metro area. Assistance caps are set as a percentage of it.
Representative score: The middle of your three credit bureau scores. With several borrowers, the lowest representative score usually controls.
Blended score: An average that pulls in a lower-scoring co-borrower’s score. It applies only to the second-lien options under set conditions.
Combined loan-to-value (CLTV): Your first loan plus any second liens, divided by the home’s value. A second lien raises it.
Balloon: A lump sum due at the end of a loan term. The repayable second has one in year 10.
Minimum required investment: The 3.5% FHA expects you to put into the purchase. The grant and the seconds can supply it.
Questions to Ask Before You Apply
1. Which first liens does this assistance option pair with?
2. Which credit score does the lender use for a joint application?
3. Does my address qualify under both the first lien and the assistance option?
4. Is the assistance a grant or a loan, and what triggers repayment?
5. What counts as income for my household?
6. What documents will the file need?
Comparing Your 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. Consumer mortgage lending is licensed in 16 states, so availability depends on where you are buying. You can reach the team at 828-256-2183. Programs change, and every file is underwritten individually. This is not a commitment to lend.
Frequently Asked Questions
Do I have to be a first-time buyer to get down payment assistance?
No. Repeat and move-up buyers qualify across the options Lendmire arranges. The three-year first-time definition is only one of several categories that can qualify you for the grant.
What if my income is too high?
It depends on the option. The grant has a 140% of area median income test, unless you fall into a qualifying category such as educator, first responder or military. The forgivable and repayable seconds have no income limit of their own, except USDA’s limit on a USDA first lien.
Which credit score does the lender use?
The lender uses the representative score, the middle of three bureau scores, and with several borrowers it uses the lowest one. The second-lien options allow a blended score under set conditions. The floors are 620 for the grant, 640 for the forgivable second and 660 for the repayable second.
Can I use assistance on a rental or second home?
No. Assistance is for an owner-occupied primary residence only.
Who decides if I qualify, the lender or the program?
Both do. The lender screens you against the first-lien rules and the assistance rules, and the stricter limit controls. Passing the agency minimum does not guarantee approval.
For your own numbers, request a scenario review with Lendmire.
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. HUD
2. USDA Rural Development: Single Family Housing Guaranteed Loan Program
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 to Go From Renter to Owner With Down Payment Assistance · How to Line Up Down Payment Assistance Before Your First Offer · Can You Use Down Payment Assistance on a New Construction Home?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.