The Quick Read: The check you bring to closing gets smaller because outside money covers part of your minimum investment, and sometimes part of your closing costs. That money is applied at settlement. It is not handed to you. How much it saves depends on the shape: a grant with nothing to repay, a forgivable second loan, or a repayable second loan. Each one trades cash today for a different string later.
What to Know Before the Numbers
Here is the whole idea in five bullets. The rest of the article fills in the mechanics.
- Cash to close is more than your down payment. It also includes closing costs and prepaid items, minus deposits and credits.
- Assistance is a percentage of the price or value, not a fixed dollar promise.
- The grant has nothing to repay. The forgivable second is a loan that is forgiven on a schedule. The repayable second is a loan with a monthly payment and a balloon.
- You do not have to be a first-time buyer. Repeat and move-up buyers qualify, subject to program guidelines.
- It works for owner-occupied primary residences only. It cannot be used on a second home or a rental.
What Counts as Cash to Close?
Cash to close is the money you wire or bring by cashier’s check at the table. The formula is simple:
Down payment + closing costs + prepaid items − earnest money already paid − seller credits − assistance applied = cash to close.
Prepaid items are costs you pay in advance, such as the first stretch of homeowners insurance and some property tax and interest. They are separate from the lender and title charges.
Closing costs and cash to close are not the same number. Closing costs leave out the down payment. Cash to close includes it, then subtracts your credits.
Assistance enters that formula as a subtraction, alongside the other credits, which lowers the cash to close. Lendmire’s down payment assistance programs are arranged through wholesale lenders, subject to program guidelines and full underwriting. Each one pairs with a government-backed first mortgage. The assistance does not replace that mortgage. It sits beside it.
How the First Loan and the Assistance Get Underwritten
The first loan is sized first, and the assistance is layered on top. Across the wholesale programs Lendmire places files with, the sequence runs like this.
1. Price and value. The contract price sets the starting point. For the second-lien options, the assistance is a percentage of the lesser of price or appraised value. A low appraisal can shrink it.
2. First lien sizing. On an FHA first mortgage, the minimum investment is 3.5%, per HUD’s FHA loans page. That leaves first-lien leverage at 96.5%. An upfront mortgage insurance premium is typically financed into the loan, so it usually does not add to cash at the table. An annual premium also applies.
3. Assistance layered in. The grant covers part of the FHA minimum investment. A second lien covers it through a separate loan. Neither is a gift from the seller.
4. Ratios. A repayable second has a monthly payment, and that payment counts in your debt-to-income ratio. A forgivable second has no payment. It still counts toward combined leverage and is recorded against the property.
5. Credit and automated findings. Each option carries its own credit floor. The second-lien options follow the automated underwriting finding on the file. Manual underwriting is allowed on the forgivable second but not on the repayable one.
6. Education, for the grant. A homebuyer education course is required. You pay up front, and the cost is credited back at closing.
7. Settlement. The assistance is applied at the closing table. It reduces the amount you wire.
The Four Shapes Side by Side
Four structures exist in this network. Which fits depends on your credit, your savings, and the first loan you use.
| Shape | Amount | Repay? | Credit floor | First loan |
|---|---|---|---|---|
| Grant | 2% or 3.5% of price | Nothing to repay | 620 | FHA only |
| Forgivable second | 3.5% of lesser of price or value | Forgiven after 36 or 60 on-time payments | 640 | FHA, USDA, HUD-184 |
| Repayable second | 3.5% or 5% of lesser of price or value | Yes, with monthly payment | 660 | FHA, USDA, HUD-184 |
| Refinance-cost second | 1% to 3.5% of balance | Yes, same terms as repayable | 660 | FHA refinance |
A few details sit behind that table.
The grant is released at closing with no lien, no payment and no interest. It needs household income at or below 140% of area median income, unless you fall into a qualifying category. Those categories are first responders, educators, medical workers, civil servants, military personnel, first-time buyers, and buyers in underserved census tracts. The grant is not offered in Washington.
The forgivable second has no interest and no payment. It is forgiven in full after the first 36 or 60 on-time first-lien payments, with no delinquency of 90 days or more. It runs on a 30-year lien term. It carries no homebuyer counseling requirement.
The repayable second is a real loan. It carries interest, a monthly payment, 30-year amortization and a balloon due in year 10. At 5%, it covers the 3.5% minimum investment plus 1.5% toward closing costs and prepaid items. It comes with its own loan disclosure and a balloon disclosure.
The refinance-cost second applies to an FHA refinance, not a purchase. It helps with closing costs, with combined leverage up to 104%. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Research on public programs points the same way. The Urban Institute found that most programs are second mortgages and roughly one in ten is a grant. Check the structure before you celebrate the headline number.
The $300K Purchase, Shape by Shape
Take a buyer under contract at $300K using an FHA first mortgage. To keep the comparison clean, this uses percentages of price only. Closing costs and prepaids are the same across every row, and they vary by file.
| Option | What it covers | What you still fund | The string |
|---|---|---|---|
| No assistance | Nothing | 3.5% minimum plus closing costs and prepaids | None |
| Grant at 3.5% | The full 3.5% minimum | Closing costs and prepaids | None to repay |
| Grant at 2% | Part of the minimum | 1.5% of price, plus closing costs and prepaids | None to repay |
| Forgivable second, 3.5% | The full 3.5% minimum | Closing costs and prepaids | A lien until forgiven |
| Repayable second, 5% | The 3.5% minimum plus 1.5% toward closing costs | The rest of closing costs and prepaids | Payment, balloon in year 10 |
Read the table by rows, not by headline. A 3.5% grant and a 3.5% forgivable second take off the same slice of cash. The difference is what follows you home. One leaves no lien. The other leaves a lien that disappears only if you make 36 or 60 on-time payments.
The 5% repayable second cuts the most cash. It also adds the most obligation: a second monthly payment and a balloon. It is a fair trade for some buyers and a poor one for others.
On a USDA first mortgage, there is no required down payment. Your cash to close is driven by closing costs and prepaids, less seller credits and any financed costs. An assistance second would reduce those. On an HUD-184 first mortgage, the minimum required investment is based on the lesser of appraised value or acquisition cost.
Where the Simple Math Breaks
The tidy table hits a few snags in real files. These are the ones that come up most often.
Closing costs can outrun the help. A 3.5% grant covers the minimum investment, not the rest. If your closing costs and prepaids are large, you still bring cash. Only the repayable second at 5% reaches past the minimum into closing costs.
You cannot pocket the difference. Assistance cannot produce cash back. USDA’s loan handbook warns that a loan can fail program requirements if the applicant receives cash back beyond out-of-pocket costs. The same discipline applies on FHA files. If assistance would exceed what you owe at the table, the lender adjusts it.
Earnest money is already in the math. Your deposit is subtracted when cash to close is computed. Assistance does not reimburse it as a separate benefit.
Seller credits and assistance share the same ceiling. Both reduce cash to close. Both are reviewed together, so a large seller credit can leave less room for the assistance to apply.
The grant has the income test. At 140% of area median income, it screens out some higher earners unless you fit a qualifying category. The second-lien options have no income limit beyond USDA’s own limits on a USDA first loan.
High-balance loans narrow the field. The grant does not pair with an FHA high-balance first lien. The repayable second does allow one. FHA one-unit limits run from $541,287 to $1,249,125 depending on the county.
Property type matters. The grant covers one-to-four-unit homes, FHA-approved condominiums and planned unit developments. The second-lien options cover single-family homes, condominiums and planned unit developments.
Price ceilings. The first mortgage has loan limits, and the assistance has its own rules.
Nothing stacks. No option can be combined with another assistance program. A mortgage credit certificate is not permitted with the second-lien options.
HUD-184 does not hand out assistance itself. The program guarantees the first loan. The assistance is a separate second lien that pairs with it.
A renovation can ride along. On the second-lien options, minor non-structural repairs up to $5,000 can be held in escrow. The holdback is 150% of the estimate, and the timeline for completing the work varies by file and lender.
Where It Shows Up on Your Paperwork
The cash-to-close line sits on two documents. The Loan Estimate gives you an early projection. The Closing Disclosure gives the final figure. The “Cash to Close” figure is the actual amount you bring, and it differs from total closing costs.
Expect the early estimate to move. Your appraisal, the credits, and final charges all shift the number. A repayable second gets its own loan disclosure on top of the first mortgage’s. Read both.
A family gift is a separate question. HUD notes that the FHA minimum can come as a gift from a family member, employer or charitable organization. Whether a gift can sit beside a particular assistance option is for the lender to review on your file.
Key Terms Defined
Cash to close: The total you bring to settlement after credits, deposits and assistance are subtracted.
Minimum required investment: The smallest amount of your own money an FHA first mortgage needs, 3.5% of the lesser of price or appraised value.
Second lien: A separate loan recorded behind your first mortgage. It gets paid second if the home is sold.
Forgivable: A loan that is wiped out if you meet its conditions, here 36 or 60 on-time first-lien payments.
Balloon: A lump sum due at the end of a loan term, here in year 10 on the repayable second.
Combined leverage: Your first loan plus any second lien, measured against the home’s value.
Prepaid items: Costs you pay in advance at closing, such as the first stretch of insurance, tax and interest.
What the Decision Looks Like in Practice
Start with the strings, not the savings. A smaller check feels good on closing day. The lien, the payment or the balloon is what you carry afterward.
Picture four buyers.
- A renter with thin savings and a clean file. Check the grant first. If household income is under the 140% test or a category applies, nothing is owed back.
- A teacher or nurse who earns above the income line. The grant’s qualifying categories may still apply. Ask first.
- A repeat buyer moving up. Most buyers assume assistance is for first-timers only. It is not. The second-lien options have no first-time requirement.
- A buyer short on closing costs, not just the down payment. The repayable second at 5% is the shape that reaches into closing costs. Weigh the payment and balloon honestly.
Run the whole cost, not only cash to close. A forgivable second is cheap if you stay put for the full period. If you sell or refinance early, the balance generally comes due. A repayable second adds a payment to your monthly budget. Keep savings in the bank after closing, because an emergency fund matters as much as the wire amount.
Questions worth asking your loan officer:
- Does this option cover the down payment, closing costs, or both?
- Is it a grant, a forgivable second, or a repayable second?
- What is my credit floor, and does a blended score apply?
- Which first loan does it pair with?
- What happens if I sell or refinance early?
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. Programs change, and every file is underwritten individually. This is not a commitment to lend.
Frequently Asked Questions
Does assistance cover closing costs too?
Sometimes. The grant and the forgivable second are aimed at the 3.5% minimum investment. The repayable second at 5% adds 1.5% toward closing costs and prepaid items. Your total need depends on the file, so compare the covered amount to your closing cost estimate.
Do I get a check from the assistance?
No. The funds are applied at settlement and reduce the amount you wire. Assistance cannot produce cash back to you.
What if I sell before a forgivable second is forgiven?
The balance generally comes due when you sell, refinance or pay off the first loan before the 36 or 60 on-time payments are made. Forgiveness depends on making those payments with no delinquency of 90 days or more.
Do I have to be a first-time buyer?
No. None of the assistance options requires you to be a first-time buyer, so repeat and move-up buyers can qualify.
Can I use assistance on a rental or second home?
No. Assistance is for an owner-occupied primary residence only.
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
2. Urban Institute: Expanding down payment assistance awareness
3. USDA Rural Development HB-1-3555, Chapter 16
This article is part of Lendmire’s down payment assistance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Down Payment Assistance Document Checklist for a Primary Home Purchase · Down Payment Assistance Timing Rules When a Builder Controls the Close · Can a Cash-Strapped Renter Trust Down Payment Assistance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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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.