The Quick Read: It depends on the program, because no federal rule sets a forgiveness schedule. The assistance provider writes the schedule into the second-lien note. In the forgivable second Lendmire arranges through wholesale lenders, forgiveness is neither gradual nor a lump at the end of a calendar. It happens in one step after the first 36 or 60 on-time first-lien payments, subject to program guidelines and full underwriting. A grant has nothing to repay. A repayable second is never forgiven.
What Does “Forgiven” Mean Here?
A forgivable second is a real loan with a lien recorded behind your first mortgage. Forgiven means the lien is released and the balance is wiped once you meet the conditions. Until then, you owe it.
That is why the brochure answer does not settle the question. The note, the lien-release terms and any recorded covenant do. Public programs use at least three designs:
- Straight-line: a slice forgives each year or month.
- Stepped: nothing forgives for a stretch, then a slice each year.
- Cliff: the whole balance forgives at the end of the term.
The FDIC’s guide to state housing finance agency assistance says many, but not all, soft seconds are forgivable over a set term. Both gradual and all-at-once designs exist in the wild. One state agency’s published sheet, CalHFA’s Forgivable Equity Builder Loan, shows annual prorated forgiveness, and it notes the servicer issues a tax form when a loan is partly forgiven.
Other agencies’ terms are theirs. The point is that you cannot assume a shape. You read it.
How Do the Four Shapes Compare?
Across the wholesale programs Lendmire places files with, assistance comes in four shapes. Only one of them forgives on a schedule tied to payments. The table sets them side by side.
| Shape | Size | Forgiven? | Payment? |
|---|---|---|---|
| Grant | 2% or 3.5% of price | Nothing to repay | None |
| Forgivable second | 3.5% of lesser of price or value | One step, after 36 or 60 on-time payments | None |
| Repayable second | 3.5% or 5% | Never | Monthly, balloon in year 10 |
| Refinance-cost second | 1% to 3.5% of balance | Never | Same as repayable |
The grant is the only shape with no lien, no payment and no interest. It is released at closing. The forgivable second carries no interest and no monthly payment, and it runs on a 30-year lien term. The repayable second is a full loan with interest, a monthly payment and a 30-year amortization that balloons in year 10.
Assistance is always a percentage of price or value. The dollar amount depends on your purchase and your file.
Gradual or All at Once? How the Forgivable Second Works
The forgivable second the network arranges is a cliff design. Nothing comes off in monthly or yearly slices. The full balance forgives after the first 36 or 60 on-time payments on the first mortgage, depending on which term you pick. The condition is no 90-day-or-greater delinquency on the first lien.
Here is the buyer decision in plain words. The three-year term gets you free of the lien sooner. The five-year term is the longer commitment. Either way, the clock runs on payments made on time, not on calendar months alone.
Picture a buyer who takes the five-year term and sells in year four. Because forgiveness is one step, the unforgiven balance is still the full amount at that point. It comes out of the sale proceeds. A straight-line design would have erased part of it by then. This is the practical cost of a cliff, and it is the question to ask about any program: what do I owe if I leave early?
Run the same buyer through a refinance in year two. Same result. The second lien must be paid off, or the holder must agree to stay in second position. Which of those is allowed depends on the program, so ask before you plan around a refinance.
Where Do FHA, USDA and HUD-184 Fit?
None of the three provides the assistance. They insure or guarantee the first mortgage. The assistance sits behind it.
Nonprofits and governmental entities approved by HUD can give FHA-insured buyers assistance secured by a second lien. That is why a forgivable second counts as a loan on the paperwork, not a gift. The grant option is the exception in the network’s lineup because it is released at closing with no lien, and it pairs with FHA first liens only. The forgivable and repayable seconds also pair with USDA and HUD-184 first liens.
The FHA loan underneath has its own mechanics. The minimum investment is 3.5%, which means first-lien leverage up to 96.5%. An upfront mortgage insurance premium is financed into the loan, and an annual premium applies by tier. One-unit FHA loan limits for the year vary depending on the county.
Not every buyer needs to be new to homeownership. If you want the full menu, see Lendmire’s down payment assistance programs page.
Does a Grant Ever Come Back?
Not in the network’s grant option. It is released at closing, with no lien and no payment. That is the cleanest answer in the article.
Elsewhere, the word “grant” can mislead. Some public programs call something a grant but attach an occupancy rule or a deed restriction that triggers repayment on an early sale. So the label is not the test. The documents are.
The grant has its own gate. Credit floor is 620. Household income must be at or below 140% of area median income, unless a qualifying category applies: first responder, educator, medical worker, civil servant, military, a first-time buyer, or a home in an underserved census tract. An HUD-approved homebuyer education course is required. The grant is not offered in Washington, and it cannot be combined with any other assistance program.
What Triggers Repayment on the Shapes That Have a Balance?
Three events do it on almost any lien-based assistance: you sell, you refinance, or you stop living in the home as your primary residence. Renting it out counts as the last one. Assistance is for owner-occupied primary residences only. Never a second home, never a rental.
| Event | Forgivable second, before forgiveness | Repayable second |
|---|---|---|
| Sell | Unforgiven balance due from proceeds | Balance due |
| Refinance | Pay off or keep in second position | Pay off or keep in second position |
| Move out or rent | Balance due | Balance due |
| First lien 90+ days late | Forgiveness clock at risk | Default terms apply |
| Year 10 | Already forgiven | Balloon due |
One edge case matters. If a sale does not cover the second lien, that shortfall is a conversation with the holder before you list, not after. Raise it early.
USDA adds a wrinkle. Its guaranteed-loan refinance rules say assistance seconds cannot be rolled into the new loan. They must be subordinated or paid off.
What Does Each Shape Do to Your Budget and Qualifying?
A forgivable second adds no monthly payment, so it generally adds nothing to your debt-to-income ratio. A repayable second adds a payment, and that payment counts when you qualify. It can reduce the first mortgage you qualify for.
At the closing table, assistance lowers cash due, but the second shows up as its own loan with its own disclosure. That means separate Loan Estimate and Closing Disclosure timing for that loan, and for a repayable second, a balloon disclosure too. Ask to see both before you commit.
Credit floors differ by shape:
- Grant: 620.
- Forgivable second: 640, or 660 blended.
- Repayable second: 660, or 670 blended.
- Refinance-cost second: 660, or 670 blended.
A blended score averages in a lower-scoring co-borrower when the primary wage earner earns at least 60% of household income and holds the higher score. AUS approval is required.
Key Terms Defined
Cliff forgiveness: the full balance is forgiven at once when the condition is met, with nothing forgiven before then.
Straight-line forgiveness: a slice of the balance is forgiven on a regular schedule, so an early exit leaves a smaller balance.
Soft second: a second lien with no payment, due only on sale, refinance or a covenant breach unless forgiven first.
Subordination: the second-lien holder agreeing to stay behind a new first mortgage when you refinance.
Balloon payment: the large remaining balance due all at once at the end of a term, in year 10 on the repayable second.
Combined loan-to-value: the first loan plus all junior liens, divided by the home’s value.
How Do You Find Your Own Schedule?
Read these documents before you sign, not after. The answer is in them.
1. The promissory note for the second. It states the forgiveness condition and what you owe if you leave.
2. The recorded deed of trust or mortgage. It shows the lien that sits behind your first mortgage.
3. Any occupancy or regulatory covenant. It tells you how long you must live in the home.
4. The subordination terms. They say whether you can refinance and keep the second.
5. The Loan Estimate and Closing Disclosure. The second has its own disclosure.
Ask the loan officer three questions. When does forgiveness happen, and does the clock ever pause or reset? What exactly do I owe if I sell in each year? And if I refinance, will the holder subordinate?
After the last payment that triggers forgiveness, confirm the lien release is recorded and keep a copy. A lien that is forgiven in the note but still sits on title can surface at your next sale.
If you are a repeat buyer wondering whether any of this applies to you, no option in the network requires a first-time buyer.
Which Shape Fits Which Buyer?
Thin savings and a stable plan to stay several years: the forgivable second fits, since there is no payment and the lien clears after 36 or 60 on-time payments. Short horizon or likely move: the grant, if you meet its income or category test, because nothing is owed at exit. Need closing-cost help too: the repayable second at 5% adds 1.5% toward closing costs and prepaids, but it is a loan with a payment and a year-10 balloon.
Here’s the catch with the repayable second. It is the only shape that adds a monthly obligation, so it should pass your budget on its own, not on hope.
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, subject to program guidelines and full underwriting. Call 828-256-2183.
Frequently Asked Questions
Is down payment assistance ever forgiven a little at a time?
Some public programs do it that way, forgiving a slice each year, as the CalHFA sheet shows. The forgivable second Lendmire arranges does not. It forgives in one step after the first 36 or 60 on-time first-lien payments. Read the note for any program you consider.
What do I owe if I sell before the forgiveness date?
The unforgiven balance, taken from your sale proceeds. With a single-step forgiveness, that is the full balance until the condition is met. A grant has nothing to repay at any point.
Can I refinance before the assistance is forgiven?
Usually the second lien must be paid off, or its holder must agree to remain in second position. USDA first liens cannot absorb the second into the new loan. Ask about subordination before you plan a refinance.
Is a grant really never repaid?
The grant option in the network is released at closing, with no lien and nothing to repay. Other programs may label something a grant but attach conditions, so check the documents. FHA treats lien-secured help as secondary financing regardless of the label.
Can I use assistance on a rental or second home?
No. Assistance is for an owner-occupied primary residence only.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, USDA and HUD-184 home purchase financing with grant-style, forgivable and repayable down payment assistance options in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. 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.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your home or investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
1. FDIC – State HFA Down Payment and Closing Cost Assistance
2. CalHFA – Forgivable Equity Builder Loan sheet
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 Much Down Payment Assistance Can You Get? · Should You Take Down Payment Assistance If You Plan to Refinance? · Down Payment Assistance vs Gift Funds From Family
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.