The Quick Read: No. Whether you repay depends on the legal form of the help, not on the word “assistance.” A grant has nothing to repay. A forgivable second is a loan that disappears if you make the required on-time payments on your first mortgage. A repayable second is a real loan with a monthly payment. Your closing documents tell you which one you have.
The Four Shapes, Side by Side
Four structures cover most of what Lendmire arranges through wholesale lenders, always on an owner-occupied primary residence and subject to program guidelines and full underwriting. Only one has no repayment obligation at all.
| Option | Do you repay? | Monthly payment? | What decides it |
|---|---|---|---|
| Grant | Nothing to repay | None | Released at closing, no lien |
| Forgivable second | Only if you leave early | None | 36 or 60 on-time first-loan payments |
| Repayable second | Yes | Yes | 30-year schedule, balloon in year 10 |
| Refinance-cost second | Yes | Yes | Repayable terms, for FHA refinance costs |
The pattern is simple. If there is a lien, there is a loan. If there is no lien, there is nothing to pay back.
Public agencies use the same building blocks. The FDIC’s guide to state housing finance agency programs describes forgivable grants, zero-interest deferred seconds, and fully amortizing second loans. It adds that the terms and eligibility vary by state, and many states run more than one program.
What Does “Nothing to Repay” Actually Mean?
The grant option means exactly what it says. It is a percentage of the purchase price, 2% or 3.5%, applied toward the FHA minimum investment. It is released at closing. There is no lien, no interest, and no payment.
It comes with conditions at the front end instead. Across the wholesale programs Lendmire places files with, the grant calls for a 620 credit score. It also requires a homebuyer education course, which you pay for up front and get credited back at closing. It pairs with an FHA first mortgage, and it is not offered in Washington. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Eligibility is a choice between two doors. Your household income can sit at or below 140% of area median income. Or you can fit a qualifying category: a first responder, an educator, medical personnel, a civil servant, military personnel, a first-time buyer, or a buyer in an underserved census tract.
Nobody needs to be a first-time buyer. A repeat buyer moving up can use these options. “First-time buyer” is just one of the grant’s qualifying categories. It means you had no ownership interest in a residential property in the three years before you applied.
One caution: a program’s own label can mislead you. Some programs call a forgivable loan a “grant.” If the paperwork mentions a lien, a note, or a recorded document, you are looking at a loan.
You will also find assistance described across Lendmire’s down payment assistance programs as a percentage of price or value, never a fixed dollar promise. What you actually receive depends on your price, your loan, and the option you choose.
When a Forgivable Second Turns Into a Gift (and When It Doesn’t)
The forgivable second is 3.5% of the lesser of the purchase price or the appraised value. It carries no interest and no monthly payment. It is fully forgiven after your first 36 or 60 on-time first-mortgage payments, depending on the version. “On time” has a definition: no payment 90 days or more late.
Until you reach that finish line, the lien sits on your home. It is still a loan. Sell, refinance, or move out before the forgiveness date, and expect the lien to be settled at that point. Your note spells out exactly how. Some programs forgive in steps and some forgive at the end of the term. Read yours rather than assuming.
Credit minimums run a little higher than the grant, at 640 for the forgivable second. It pairs with FHA, USDA, or HUD-184 first mortgages, covers one- and two-unit homes, and has no income limit beyond USDA’s own on a USDA first lien.
Urban Institute research finds that forgiveness waits across public programs often run about five years, and that most second-mortgage programs charge no interest at all. Both facts match the forgivable structure: patience is the price.
Which Second Has a Payment?
The repayable second is a real loan. It covers 3.5% or 5% of the lesser of price or appraised value. At 5%, it also helps with closing costs and prepaid items, so the buyer’s 3.5% minimum investment is paired with an additional 1.5% toward closing costs.
Here is how it behaves:
- It is interest-bearing and has a monthly payment.
- It amortizes over 30 years, with a balloon, meaning the remaining balance comes due all at once in year 10.
- It gets its own loan disclosures, including a balloon disclosure.
- The credit floor is 660.
- It pairs with FHA, USDA, or HUD-184 first mortgages on one- and two-unit homes.
The balloon is the part buyers overlook. By year 10, most owners will have sold, refinanced, or saved up to pay the second off. Plan for that date on day one.
The refinance-cost second is the same kind of loan with a different job. It puts 1% to 3.5% of the balance toward the closing costs of an FHA refinance, with combined leverage up to 104%. It is not for a streamline refinance, and it cannot refinance an existing assistance loan. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
What Happens If Life Changes?
The trigger language in your note controls the outcome. These are the usual scenarios.
You sell early. A grant has no lien, so nothing comes out of your proceeds. A forgivable second that has not yet been forgiven gets settled at sale. A repayable second gets paid off from the sale, which reduces what you walk away with.
You refinance. Plan on the second lien being paid off or kept behind the new first loan. An existing down payment assistance second generally cannot be rolled into a new refinance, so it has to be paid off or stay subordinate. Check your note before you chase a lower payment.
You move out or rent the home. Assistance goes with owner-occupied primary residences only. Turning the house into a rental breaks the occupancy promise you signed. Expect the lien terms to respond.
You pay off the first mortgage early. That generally ends the forgiveness clock on a forgivable second and triggers repayment of any lien still standing.
You stay the full term. The grant needs nothing from you. The forgivable second disappears. The repayable second runs on schedule to the year-10 balloon.
A family gift is a separate path. It needs a gift letter and a documented transfer, and no repayment is expected. Do not confuse it with a lien.
Does Assistance Change Your Monthly Budget?
A grant adds no payment. A forgivable second adds none either. A repayable second adds one, and the lender counts it when testing whether you can afford the whole package.
The FHA loan underneath has its own costs. The minimum required investment is 3.5% of the lesser of price or appraised value, per HUD. On the files Lendmire arranges, FHA also carries an upfront mortgage insurance premium, which can be financed into the loan, plus an annual premium. The annual premium is lower at or below 90% loan-to-value and higher above it.
FHA’s 2026 one-unit loan limits run from $541,287 to $1,249,125, depending on the county. High-balance first liens are allowed with the repayable second but not with the grant or the forgivable second.
The practical read: assistance lowers the cash you need at closing. Whether it raises your monthly cost depends entirely on the shape you pick.
Which Structure Fits Your Plans?
The honest answer is a toss-up between the grant and the forgivable second for most buyers who qualify for both. The grant is simpler. The forgivable second asks less of you on eligibility, with no income test. It asks more of you in staying power.
Use this as a rough guide:
- Planning to stay five years or more: the forgivable second is a strong fit, because the clock runs out in your favor.
- Fit a category or the income test, and want no strings: the grant has nothing to repay and no lien.
- Thin savings, closing costs are the real wall: the repayable second at 5% covers both, at the price of a monthly payment and the year-10 balloon.
- Might sell or relocate in a few years: weigh a grant or a repayable second over a forgivable one. An unforgiven balance comes due when you leave.
The options do not stack. No option combines with another down payment assistance program, and a mortgage credit certificate is not permitted with the second-lien options. You pick one.
What Should You Check Before You Sign?
Bring these to your loan officer, and read them before closing:
1. The note and the lien. Is there a recorded lien at all? That one fact separates a grant from a loan.
2. The repayment triggers. Look for sale, refinance, payoff, ceasing to occupy, and end of term.
3. The forgiveness schedule. Does it forgive all at once, or in steps? What counts as “on time”?
4. Interest and payment terms. Does the second have a payment? Is there a balloon?
5. The occupancy period. How long must you live there?
6. The disclosure for the second loan. A repayable second has its own, separate from the first mortgage.
Ask the loan officer four questions out loud. Which option is this? What happens if I sell in year three? What happens if I refinance? Is there a balloon, and when?
Lendmire works as a broker arranging these options, so the lender’s guidelines and your full underwriting decide the final terms. Programs change, and every file is underwritten individually.
Key Terms Defined
Grant-style assistance: Money applied at closing that you do not repay. No lien is recorded.
Second lien: A loan secured by your home that sits behind your first mortgage. If you sell, the first lender gets paid first.
Forgivable second: A second lien with no interest and no payment that is erased after you meet the schedule.
Balloon payment: The remaining loan balance, due in one lump sum on a set date, in year 10 for the repayable second.
Area median income (AMI): The middle household income for your area. The grant option uses an income limit tied to AMI as one eligibility test, unless a category applies.
Owner-occupied primary residence: The home you live in as your main address. It excludes second homes and rentals.
Frequently Asked Questions
Can I sell my home before a forgivable second is forgiven?
Yes, but expect the remaining lien to be settled at sale. Forgiveness comes after the first 36 or 60 on-time first-mortgage payments, depending on the version. Before that point, the lien is still a loan against your home. Your note explains how any unforgiven portion is handled.
Does down payment assistance raise my monthly payment?
Only the repayable second does. The grant and the forgivable second carry no monthly payment. The repayable second is a 30-year amortizing loan with a balloon due in year 10, and lenders count its payment when testing affordability. The FHA first mortgage also carries mortgage insurance, which is financed or paid monthly.
Do I have to be a first-time buyer or low-income?
No option requires a first-time buyer, so repeat buyers qualify. The second-lien options have no income limit, apart from USDA’s own limits on a USDA first lien. The grant is the one with an income test: 140% of area median income, unless you fit a qualifying category such as a first responder, educator, or underserved tract.
Can I use assistance on a rental or second home?
No. Assistance is for an owner-occupied primary residence only.
Is a grant ever repaid?
The grant option has nothing to repay. It is released at closing with no lien, no payment, and no interest. The risk is the label. Some programs call a forgivable loan a “grant,” so confirm no lien is recorded.
Ready to Compare?
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. Call 828-256-2183 to talk through your situation, subject to program guidelines and full underwriting.
About Lendmire
Lendmire is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging government-backed purchase loans and the down payment assistance options that sit on top of them through a wholesale lending network. Eligibility is determined by the lender on each file. 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. FDIC Affordable Mortgage Lending Center: State HFA Down Payment Guide
2. HUD: Section 184 Indian Home Loan Guarantee Program
3. Urban Institute: Expanding Down Payment Assistance Awareness
This article is part of Lendmire’s down payment assistance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Use a USDA Loan Twice With Down Payment Assistance? · Does Down Payment Assistance Have to Be Repaid If You Relocate? · Can You Get Down Payment Assistance After Owning a Home Before?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.