The Quick Read: No. Some assistance carries nothing to repay, but some of it is a real loan, and the paperwork decides which one you have. A grant is released at closing with no lien and no payment. A forgivable second lien is erased if you keep the home and make your first-mortgage payments on time. A repayable second lien is a loan with a monthly payment and a balloon due in year 10, subject to lender guidelines and full underwriting.
The Short Answer by Type
Whether you owe the money back depends on the shape of the assistance. Across the wholesale programs Lendmire arranges for primary-residence buyers, four shapes show up, and they behave very differently.
| Type | Repaid? | Monthly payment? | When it comes due |
|---|---|---|---|
| Grant | No | None | Nothing to repay |
| Forgivable second | Only if you leave early or fall far behind | None | Forgiven after 36 or 60 on-time payments |
| Repayable second | Yes | Yes | Monthly, with a balloon in year 10 |
| Refinance-cost second | Yes | Yes | Same terms as the repayable second |
Every option sits behind a government first mortgage: FHA, and for the second liens, USDA or HUD-184 as well. Assistance is a percentage of price or value, never a fixed dollar promise. Programs change, and every file is underwritten individually.
Is It Just a Gift, Then?
No, and the label “assistance” hides a wide range. Research from the Urban Institute and Down Payment Resource found that nearly 90 percent of programs are second mortgages, with grants making up a small minority. Of the second-mortgage programs, just over half offer some forgiveness.
So the safe assumption is this: a second lien is a loan until the document says otherwise. The grant is the exception, and even it can carry conditions. Read the agreement the way you would read a note.
Grant: Nothing to Repay
The grant option covers 2% or 3.5% of the purchase price toward the FHA minimum investment. It is released at closing. No lien is recorded, no interest accrues, and no payment is due.
What the grant does require is eligibility and a little homework:
- A credit floor of 620 (the lowest representative score among all borrowers).
- An FHA first lien at 96.5% loan-to-value, on a one-to-four-unit home.
- A HUD-approved homebuyer education course. The buyer pays for it up front, and the cost is credited back at closing.
- Household income at or below 140% of area median income, unless you fall into a qualifying category.
The categories are broad. They include first responders, educators, medical personnel, civil servants, military personnel, first-time buyers, and anyone buying in an underserved census tract. The grant is not offered in Washington.
Here’s the catch with grants in general: “nothing to repay” is a statement about this option’s structure, not about every product sold under the word. The FDIC’s guide to state housing finance agency programs confirms grant funds do not have to be repaid, in contrast to second mortgages. Some public grants still add conditions, such as an early-refinance trigger. Ask for the agreement and read it before you count on the money.
Forgivable Second: Repaid Only If the Clock Breaks
The forgivable second is a lien, but a patient one. It covers 3.5% of the lesser of the purchase price or appraised value. There is 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, with no delinquency of 90 days or more.
Think of it as a loan that melts if you behave like a homeowner. The credit floor is 640 (660 blended). The first lien can be FHA, USDA or HUD-184, on a one-to-two-unit home.
Two things can break the arrangement: falling seriously behind on the first mortgage during the forgiveness period, or leaving before the clock runs out. In either case the unforgiven balance is owed.
HUD draws a firm line here. Its guidance on FHA secondary financing says a forgivable or silent second is not treated as a gift, even with no payments, because it is a lien on the property. The lender cannot relabel it.
Repayable Second: A Real Loan
The repayable second covers 3.5% or 5% of the lesser of price or appraised value. At 5%, it also helps with closing costs and prepaid items (3.5% for the minimum investment plus 1.5% toward closing costs).
It behaves like a loan because it is one. It bears interest, requires a monthly payment, amortizes over 30 years, and comes due as a balloon in year 10. It has its own Loan Estimate-style disclosure and a separate balloon disclosure. The credit floor is 660 (670 blended), manual underwriting is not allowed, and there is no income limit beyond USDA’s own on a USDA first lien.
For your budget, that monthly payment counts in your debt-to-income ratio.
A fourth shape exists for people who already own: a refinance-cost second, covering 1% to 3.5% of the balance toward the costs of an FHA refinance, with combined leverage to 104%. It carries the repayable second’s terms.
What Triggers Repayment?
Most of the risk sits in a short list of events. If you hold a forgivable or repayable second, expect these to matter:
- Selling the home. The balance is paid from sale proceeds at closing.
- Refinancing the first mortgage. The second usually must be paid off or stay behind the new loan. USDA, for example, says silent seconds cannot be rolled into a new guaranteed refinance; they must be paid with other funds or remain subordinate.
- Moving out. These programs are for owner-occupied primary residences only. Renting the home or turning it into a second home breaks the deal.
- Falling far behind on the first mortgage. A 90-day delinquency during the forgiveness window can forfeit forgiveness.
- Paying off the first mortgage early. The second lien does not vanish with it.
The grant option has no lien, so none of these apply to the money itself. Still, check whether the specific agreement adds any condition.
Four Buyers, Four Outcomes
Run the scenarios in plain words, with no dollar figures.
The renter who stays. A buyer takes the forgivable second on a first home and makes every payment on time for the full period. The lien is forgiven, and a release document follows. Nothing was ever repaid.
The job-transfer mover. Another buyer takes the same forgivable second but relocates before the forgiveness clock ends. The unforgiven balance is owed, typically paid out of sale proceeds. If the home has gained equity, that is manageable. If prices flattened, it eats into what the seller walks away with.
The refinancer. A buyer with a repayable second wants a new first mortgage a few years in. The second lien must be paid off or subordinated, which adds a step and, sometimes, a hurdle. Plan for it before you assume a refinance is simple.
The grant buyer. A buyer qualifying through a public-service category uses the grant. There is no lien, no payment, and nothing to track after closing.
Does Assistance Change Your Monthly Budget?
Yes for the repayable shapes, no for the others, with one caution. A grant, a forgivable second and a deferred second generally add no required monthly payment. A repayable second adds one and counts in your ratios. The lender confirms the treatment from the second’s terms.
The first mortgage still has its own cost. FHA requires a minimum investment, with an upfront mortgage insurance premium that can be financed plus annual mortgage insurance. Assistance can fund the minimum investment, but the funds must still be documented and come from a permitted source. Low-down-payment options usually cost more over time, so ask to see several choices side by side.
Who Qualifies (It’s Not Just First-Timers)
No option in this network requires a first-time buyer. Repeat and move-up buyers qualify. The second-lien options carry no income limit beyond USDA’s own on a USDA first lien. The grant is the only one with the 140% area-median-income test, and many buyers sidestep it through a qualifying category.
Everything is owner-occupied primary residence only. No second homes, no rentals. And nothing stacks: you cannot combine one assistance option with another assistance program, and a mortgage credit certificate is not permitted with the second liens.
Key Terms Defined
Grant: assistance released at closing with nothing to repay and no lien.
Second lien: a loan secured by the home that sits behind the first mortgage.
Forgivable second: a no-interest, no-payment second lien that is erased after a set number of on-time payments.
Balloon: a lump-sum balance due at the end of a set period, here in year 10 of the repayable second.
Subordination: the second-lien holder agreeing to stay behind a new first mortgage after a refinance.
Secondary financing: any loan on the property other than the first mortgage.
How to Check What You Actually Owe
Don’t trust the brochure. Trust the documents. Three items settle the question:
1. The note and the recorded security instrument. If they exist, you have a lien.
2. The grant or gift agreement. Read any condition attached.
3. The program disclosure. It states payment, forgiveness and balloon terms.
Ask the lender two direct questions: what exactly triggers repayment, and what happens if I refinance? An HUD-approved housing counselor can also point you to state, local and nonprofit options.
Is Assistance Still Worth It?
Often, yes, with the right expectations. If thin savings are the only thing between you and a home, assistance can bridge that gap. A grant or forgivable second is hard to beat when you plan to stay for years.
The flip point comes when you expect to move or refinance soon. A repayable second with a year-10 balloon, or a forgivable second you may leave early, can cost more than the cash it saves. In that case, a larger down payment from savings or family may be the better call. It’s a genuine toss-up for some buyers, and the answer depends on how long you plan to stay.
Find the full range of down payment assistance programs Lendmire arranges.
Frequently Asked Questions
Can a “grant” still turn out to be a loan?
Sometimes, depending on the program. Some public programs call a forgivable loan a grant, and some true grants add conditions such as an early-refinance trigger. The network’s grant option is released at closing with no lien. Confirm whether a lien or note exists in your closing documents.
What happens if I refinance with a forgivable or repayable second?
The second lien usually has to be paid off or stay behind the new first mortgage. Agency rules, such as USDA’s, bar rolling an existing silent second into a new guaranteed refinance. Raise this with your loan officer before you plan a refinance.
Does assistance add to my monthly payment?
Only the repayable shapes do. A grant and a forgivable second add no required payment. A repayable second carries a monthly payment on a 30-year schedule with a balloon in year 10, and it counts in your debt ratios.
Do I have to be a first-time buyer?
No. Repeat and move-up buyers qualify for every option. The three-year first-time definition is just one of the grant’s qualifying categories, and the second-lien options have no income limit beyond USDA’s own on a USDA first lien.
Can I use assistance on a rental or second home?
No. These options are for owner-occupied primary residences only.
Next Step
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, through wholesale lenders and subject to program guidelines and full underwriting.
Investors who want the broader program framework can review how DSCR loans work.
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.
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References
1. Urban Institute, Expanding Down Payment Assistance Awareness
2. FDIC, State HFA Down Payment and Closing Cost Assistance
3. HUD FHA Connection, Secondary Financing Background
This article is part of Lendmire’s down payment assistance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Does Down Payment Assistance Have an Income Limit? · How to Qualify for Down Payment Assistance When You’re Self-Employed · Can You Get Down Payment Assistance While Still Owning a Home?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.