The Quick Read: A grant covers a set percentage of your purchase price, applied against the minimum investment your FHA loan requires. In the grant option Lendmire arranges, that share is 2% or 3.5% of the price, with nothing to repay. It does not cover every closing cost, and it is not a dollar amount fixed in advance. The percentage, the loan underneath it, and the rules on eligible uses decide how far it goes.
What Does “Covers” Actually Mean?
A grant covers the part of your cash-to-close that the first mortgage requires you to invest. It does not cover everything on the closing statement.
Start with the FHA first mortgage underneath. FHA asks you to put in a minimum investment of 3.5% of the lesser of the price or the appraised value. That is the number the grant is built to meet. The first loan then runs at 96.5% of the price. FHA’s 3.5% figure applies to borrowers with a representative credit score of 580 or higher. Lower scores face a larger requirement, but the assistance options carry their own higher credit floors. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
So the grant works like a substitute for your own savings. It fills the investment slot that your cash would otherwise fill. It does not shrink the first loan, and it does not erase the other costs of buying: appraisal, title charges, prepaid taxes and insurance, and escrow deposits.
Think of cash-to-close as three buckets:
- The minimum investment. This is the bucket the grant targets.
- Closing costs and prepaids. Their eligibility depends on the program’s terms.
- Earnest money and anything else you pay outside closing. These sit with you.
This is where buyers get tripped up. They hear “assistance” and assume the whole closing table is handled. The grant is sized to the investment, not the whole bill. Plan for the other buckets separately.
Which Grant Fits Which Buyer?
The grant option is one of four shapes, and the right one depends on your credit, income, and how you feel about owing money later. Lendmire arranges all four through wholesale lenders, subject to program guidelines and full underwriting. Here is the side-by-side.
| Feature | Grant | Forgivable second | Repayable second |
|---|---|---|---|
| Size | 2% or 3.5% of price or value | 3.5% of lesser of price or value | 3.5% or 5% of lesser of price or value |
| Repay? | Nothing to repay | Forgiven after 36 or 60 on-time payments | Yes, a real loan |
| Credit floor | 620 | 640 | 660 |
| First lien | FHA only | FHA, USDA, HUD-184 | FHA, USDA, HUD-184 |
| Income test | 140% of area median, or a category | None beyond USDA’s own | None beyond USDA’s own |
A fourth shape exists for refinancing. It is a second lien of 1% to 3.5% of the balance toward the closing costs of an FHA refinance, with combined leverage up to 104%. It is a different animal from a purchase grant, so this article stays on purchases. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
If you want the full menu of structures, Lendmire’s down payment assistance programs page lays them out.
How the Grant Is Sized: A Percentage, Not a Check
The grant is a percentage of your purchase price. At 2%, you get less help on any given home than at 3.5%. At 3.5%, the grant lines up with the entire FHA minimum investment.
That match matters. Because FHA’s minimum investment is 3.5%, a 3.5% grant can meet the whole requirement. A 2% grant meets a little over half of it, and you bring the remainder.
Picture a buyer purchasing a home with the 3.5% grant. The grant equals the minimum investment, so the buyer’s own money goes to other closing items. Now picture a buyer on the 2% version. The grant covers most of the investment, and the buyer brings the gap plus the remaining costs. Same house, different cash needed.
Percentages scale with price. A higher-priced home produces a larger grant in absolute terms, and a lower-priced home a smaller one. No one is promised a set dollar figure. Your actual number comes from your contract price, or from the appraised value if that is lower.
That last point is worth planning around. If the appraisal comes in below your price, FHA bases the minimum investment on the lower number. A percentage tied to a smaller base means a smaller grant, and it can change what you owe at the table. Ask early how the appraisal could shift your cash needs.
Step by Step: How the Loan and the Grant Are Underwritten
The first mortgage is underwritten first, and the grant rides on top of it. Here is the sequence across the wholesale programs Lendmire places files with.
1. You apply for an FHA first mortgage. The grant option pairs with FHA first liens only, at 96.5% loan-to-value, on one-to-four-unit owner-occupied homes. That covers a standard FHA purchase and the FHA repair-escrow and 203(k) variants.
2. Credit is reviewed. The grant requires a representative score of 620 or higher. That is the lowest score among all borrowers on the loan.
3. The eligibility test is applied. Your household income is checked against 140% of the area median, unless a qualifying category applies. More on that below.
4. Homebuyer education is completed. An HUD-approved course is required for the grant. You pay for it up front, and the cost is credited back at closing.
5. An automated underwriting finding is obtained. The assistance options follow the AUS finding on the first loan.
6. The grant is released at closing. It arrives with no lien, no payment, and no interest.
Notice what the grant does not require: a monthly payment, a recorded second lien, or a repayment schedule. That is the whole difference between the grant and the other three shapes.
FHA’s own loan costs still apply underneath. There is an upfront mortgage insurance premium, which can be financed into the loan, and annual mortgage insurance is added by tier based on your loan size and leverage. Those insurance costs are program mechanics, not pricing offers, so confirm current details with your lender and other qualified local professionals.
Who Qualifies? (You Do Not Have to Be a First-Time Buyer)
You do not need to be a first-time buyer to use any of these options. Repeat buyers and move-up buyers qualify. The three-year “no ownership” definition of a first-time buyer is only one of the ways to qualify for the grant.
The grant has an income test with several ways around it. You qualify if any one of these applies:
- Your household income is at or below 140% of the area median income.
- You are a first responder: police, fire, public safety, paramedic, or EMT, whether current, former, or entering service.
- You are an educator.
- You work in medical care: nurse, doctor, phlebotomist, health ambassador, hospital worker, or Red Cross worker.
- You are a civil servant at the federal, state, or local level.
- You are military personnel, whether current, retired, volunteer, or unpaid.
- You are a first-time buyer, meaning no ownership interest in a residential property in the three years before you apply.
- You are buying in an underserved census tract.
So a repeat buyer earning above the income line can still qualify as a teacher, a nurse, or a veteran. The second-lien options skip the income test entirely, except for USDA’s own limits when the first mortgage is USDA.
Two firm limits apply to every option. The home must be your owner-occupied primary residence. A second home, vacation home, or rental never qualifies. And you cannot stack the grant with another down payment assistance program. It also cannot combine with FHA High Balance, FHA $100 Down, FHA 203(h), FHA Good Neighbor Next Door, or FHA One-Time Close. The grant is not offered in Washington.
Where the General Rule Breaks
The “grant covers the minimum investment” rule has real exceptions. Five are worth knowing before you shop.
FHA does not give assistance itself. FHA insures the loan and sets the rules. The assistance comes from a separate source, and FHA’s Handbook 4000.1 is where lenders find the policy on acceptable sources and documentation. The handbook is updated periodically, which is one reason programs change and every file is underwritten on its own.
Sellers cannot fund your minimum investment. A seller credit can help with certain costs, but it does not count toward the minimum down payment on an FHA loan. A grant and a seller credit are different tools.
Appraisal gaps shrink the percentage. As noted, a low appraisal lowers the base that the percentage is applied to.
USDA behaves differently. USDA’s guaranteed loan has no down payment requirement, so assistance there mostly covers closing costs. USDA also allows a “soft second” lien for down payment or closing costs. USDA’s loan origination FAQ says assistance is allowed so long as the guaranteed loan stays in first position, and that a second with a monthly payment must be entered in underwriting as a subordinate-lien payment. Under Lendmire’s program, though, the grant itself pairs with FHA only. USDA pairs with the forgivable and repayable seconds.
HUD-184 is its own program. The Section 184 Indian Home Loan Guarantee does not provide assistance itself. Its minimum investment is smaller than FHA’s, and under the Federal Register rule it can come from the borrower’s own funds, gifts, or tribal, state, or local funds. In Lendmire’s network, HUD-184 pairs with the forgivable and repayable seconds, not the grant.
Grant, Forgivable, or Repayable: The Real Tradeoff
A grant costs you nothing later. A forgivable second costs nothing later if you stay put. A repayable second is a loan, and you should treat it as one.
Grant. Nothing to repay. There is no lien, no payment, and no interest. The tradeoff is the tighter credit floor and the income-or-category test.
Forgivable second. This is a lien recorded behind your first mortgage. It carries no interest and no monthly payment. It is fully forgiven after your first 36 or 60 on-time first-lien payments, depending on the version, with no delinquency of 90 days or more. Sell or refinance early, and the unforgiven balance can come due. The assistance is 3.5% of the lesser of price or appraised value.
Repayable second. This is a real second loan. It carries interest, a monthly payment, a 30-year amortization, and a balloon due in year 10. That payment counts in your debt-to-income picture. The assistance is 3.5% or 5%. At 5%, it covers the down payment plus closing costs and prepaid items: the 3.5% minimum investment plus 1.5% toward closing costs. A separate loan disclosure and a balloon disclosure come with it.
The monthly budget difference is the main thing to weigh. The grant and forgivable second add nothing to your payment. The repayable second adds a real obligation, and it can reduce how much you qualify to borrow. The National Housing Conference notes that a silent second reduces the first-mortgage requirement much like a grant does, but the difference shows up when you sell.
This is a genuine toss-up for some buyers. A buyer with thin savings and a solid score might prefer the repayable 5% option for its closing-cost help, though the payment tightens the budget. A buyer with strong income and a public-service job might favor the grant and keep the monthly obligation low. Neither answer is universal.
What the Lender Looks For
Across the wholesale programs Lendmire works with, the file generally needs the following.
- A credit score at the option’s floor: 620 for the grant, 640 for the forgivable second, and 660 for the repayable second.
- For the second-lien options, a blended score is possible. A lower-scoring co-borrower’s score can be averaged in when the primary wage earner earns at least 60% of household income and holds the higher score. The minimums then become 660 for forgivable and 670 for repayable, and an AUS approval is required.
- An owner-occupied one-to-four-unit home for the grant, or a one-to-two-unit home for the second-lien options. Single-family, condominium, and PUD properties qualify on the second-lien side. Unique property types are excluded.
- Homebuyer education for the grant. The second-lien options carry no counseling requirement.
- An FHA loan within county limits. The 2026 one-unit FHA limits run from $541,287 to $1,249,125 depending on the county. The grant does not pair with a high-balance first lien. The repayable second allows high-balance firsts.
One more note on repairs. The second-lien options allow escrow holdbacks for minor, non-structural repairs up to $5,000, with 150% of the estimate escrowed. The timeline for completing the work varies by file and lender.
A Practical Way to Plan Your Cash
Run your plan in three steps.
First, identify which shape fits you. Check your credit against the floors, and check whether you fall under the income line or a qualifying category.
Second, find your minimum investment. Take 3.5% of the lesser of price or value. Subtract the grant percentage. What remains is your own contribution toward that bucket.
Third, add everything else. Closing costs, prepaids, escrows, and earnest money sit outside the grant’s reach unless the program’s terms say otherwise. Ask your loan officer which of those the option you choose can touch.
Then, watch the appraisal. A lower value moves the base, and your cash-to-close moves with it.
Key Terms Defined
Minimum required investment: The share of the price you must put in on an FHA loan, 3.5% of the lesser of price or appraised value at a score of 580 or higher.
Grant-style assistance: Help with a set percentage of the price that you do not repay, released at closing with no lien.
Forgivable second: A loan recorded behind your first mortgage that is forgiven after a set number of on-time payments.
Balloon payment: A lump sum due at a set point, in the repayable second’s case in year 10.
Area median income: The middle household income for your county, used as a yardstick for eligibility.
AUS finding: The result from the automated underwriting system that tells the lender whether your file fits program rules.
Loan-to-value: The first loan as a percentage of the price or appraised value. FHA’s is 96.5% on these purchases.
Frequently Asked Questions
Does the grant cover all my closing costs?
No. The grant is sized to your FHA minimum investment, not the full closing statement. Closing costs, prepaid items, and escrows are separate buckets. Whether any of them can be paid depends on the option and its terms, so ask your loan officer before you budget around it.
Can a repeat buyer use a down payment assistance grant?
Yes. No option in Lendmire’s network requires a first-time buyer. A repeat buyer can qualify through the 140% area-median-income test or a qualifying category such as educator, medical worker, civil servant, or military service. Eligibility is subject to lender guidelines and full underwriting.
Do I have to repay the grant if I sell?
Nothing to repay on the grant option. It is released at closing with no lien, no payment, and no interest. The forgivable second works differently: selling or refinancing before the 36 or 60 on-time payments are made can bring the unforgiven balance due.
Can I use assistance on a rental or second home?
No. Assistance is for an owner-occupied primary residence only.
Can I combine the grant with another assistance program?
No. The grant cannot be combined with another down payment assistance program, and several FHA variants are also excluded. It does not stack with a second-lien option either. Programs change, so confirm your specific file with a loan officer.
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.
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.
Get Started
Ready to find the right loan for you?
In about two minutes 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. HUD Housing Handbooks index
2. USDA RD SFH loan origination FAQ
3. National Housing Conference, Down Payment Assistance
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 High Earners Can Get With Student Debt · How to Use Down Payment Assistance on a 2-4 Unit Home · Can a First-Time Buyer Get a Down Payment Assistance Grant?
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
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.