The Quick Read: It depends on which kind of assistance you use. A grant carries an income test of 140% of area median income unless the buyer falls into a qualifying category, while the forgivable and repayable second-lien options carry no income limit of their own. One catch sits underneath all of it: a USDA first mortgage has its own household income cap whether or not assistance is involved. Programs change and every file is underwritten individually, so treat this as a map, not a promise.
Three Income Tests, Not One
Most buyers ask about “the” income limit as if there were a single rule. There are really three layers, and a buyer can face any mix of them.
1. The first mortgage’s own income test. This belongs to the loan underneath the assistance.
2. The assistance program’s income test. This belongs to the grant or second lien on top.
3. The household test. Some programs count everyone in the home, not just the people on the note.
Pass all that apply and you are through. Fail one and the file stalls, even if the other two look fine. That is why two neighbors with similar paychecks can get different answers.
Does the First Mortgage Have an Income Cap?
FHA does not. HUD’s FHA resource center states that FHA loans have no maximum income limits. You still need enough income to carry the payment and your other debts, and the lender verifies income, assets, liabilities, and credit. But a high salary alone does not disqualify an FHA purchase.
HUD-184, the loan guarantee for Native American borrowers, works the same way on this point. Worth knowing: the program guarantees the first loan and does not itself hand out assistance, so any help comes from a tribe, housing authority, or other source.
USDA is the exception. USDA Rural Development’s guaranteed loan overview says household income must fall within 115% of the area median, and the property must sit in an eligible rural area. Two details trip people up:
- Every adult counts. USDA’s flyer says the income of all adult household members counts toward the limit. A buyer can look fine on their own pay and still fail on household income.
- Deductions exist. Adjusted income allows deductions for eligible dependents, an elderly household member, and certain childcare, medical, and disability expenses.
County limits live on USDA’s eligibility site, and lenders look them up file by file. Check the current figure there rather than trusting a number from an article, including this one.
The Grant: The One Option With an Income Test
Across the wholesale programs Lendmire places files with, the grant option is the one with a true income test. It provides 2% or 3.5% of the purchase price toward the FHA minimum investment, with nothing to repay. It is released at closing, with no lien, no payment, and no interest. The credit floor is 620, and it pairs with an FHA first lien at 96.5% loan-to-value. It is not offered in Washington.
Eligibility works on an “any one of these” basis. You qualify if you meet any of the following:
- Household income at or below 140% of the area median income.
- You are a first responder, an educator, medical personnel, a civil servant, or military personnel (current, former, or retired, depending on the category).
- You are a first-time buyer, meaning no ownership interest in residential property in the three years before applying.
- The property sits in an underserved census tract.
So the income test is a gate you can walk around. A buyer who earns well above the area-median threshold but teaches school, works as an EMT, or buys in a qualifying tract can still use the grant. A buyer above it with no category and a home outside an underserved tract cannot.
A homebuyer education course is also required. The borrower pays for it up front, and the cost is credited back at closing.
The Second Liens: No Income Limit of Their Own
The forgivable and repayable second liens carry no income cap beyond USDA’s, and only when the first lien is USDA. That surprises people who assume assistance always means low income.
| Feature | Forgivable second | Repayable second |
|---|---|---|
| Amount | 3.5% of price or value | 3.5% or 5% of price or value |
| Payment | None | Monthly, 30-year amortization |
| Balloon | None | Due in year 10 |
| Forgiveness | After 36 or 60 on-time payments | Not forgiven |
| Credit floor | 640 | 660 |
| First lien | FHA, HUD-184, USDA | FHA, HUD-184, USDA |
| Income limit | None (USDA’s own on USDA) | None (USDA’s own on USDA) |
The amount is the lesser of the purchase price or appraised value, which is why it is stated as a percentage and never a dollar promise. At 5%, the repayable option also reaches closing costs and prepaid items. The forgivable version carries no interest and no payment, and it is forgiven fully after the first 36 or 60 on-time first-lien payments, with no 90-day-or-greater delinquency.
The repayable second is a real loan. It has its own interest, its own monthly payment, its own disclosure, and a balloon in year 10. A loan with no income limit is not the same as a loan with no cost.
There is also a refinance-cost second, covering 1% to 3.5% of the balance on an FHA refinance, with combined leverage up to 104%. It follows the repayable terms. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
What the Grant Test Means in Practice
Here is the practical gap between the options. Picture two buyers with the same above-limit household income.
The first is an accountant with no public-service role, buying in a mainstream tract, who owned a home last year. The grant is off the table. Either second-lien option remains available, subject to credit and guidelines.
The second is a nurse in the same income bracket. The medical-personnel category opens the grant, so the income test never applies.
Same paycheck, different outcome. Neither buyer needed to be a first-timer. Nobody does, in the network these options come from. Repeat and move-up buyers qualify.
Which Income Counts?
The programs that carry an income test follow the lender’s underwriting of income, so the usual rules apply: documented, verifiable earnings. A few points deserve attention:
- Overtime and bonuses generally count when the lender can document a track record. A recent raise or a new second earner can push a household over a line.
- Household versus borrower. On USDA, all adults count even if they are not on the loan. On the grant, the area-median test is about household income, so check how the program defines the household before assuming a roommate or adult child is outside it.
- Co-signers. USDA’s flyer says repayment income comes from applicants who sign the note, and co-signers are not permitted.
- Blended scores. For the second-lien options, 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. That affects credit qualification, not income limits, but it often arises in the same conversation.
Income that sits just under or just over a line is where documentation matters most. Pay stubs, traditional personal-income documentation, and employment history decide which side a file lands on. A lender can only apply the program test to income it can verify.
Public Programs Run Their Own Rules
State and local agencies are a different world from the options above. HUD notes that many state and local government programs offer down payment and closing-cost grants. Those agencies set their own income limits, often tied to area median income or county tables, and some publish separate limits for targeted areas. Many also layer on price caps, first-time-buyer status, and mortgage insurance requirements. The San Diego Housing Commission, for example, publishes income bands tied to area median income for its first-time buyer programs.
Those limits are set by each agency and change, so go to the agency itself. A local counselor can help, and the CFPB points buyers to HUD-approved housing counseling agencies for exactly that.
One rule to remember: no assistance option stacks with another assistance program. Choose one structure per purchase. A mortgage credit certificate is also not permitted with the second-lien options.
What About Gift Funds?
Family gifts have no program income test at all. HUD says FHA’s 3.5% minimum can come as a gift from a family member, an employer, or a charitable organization. The donor cannot be someone with a financial stake in the sale, like the seller or agent.
Government-provided assistance has a documentation trail of its own. HUD’s Handbook 4000.1 glossary defines a governmental entity as a federal, state, or local agency or instrumentality, and it defines “low- to moderate-income” as household income not above 115% of area median income, adjusted for family size. Lenders need proof of the source and proof the funds moved at closing. Gifts are simpler; assistance with a lien is more structured.
If You Are Over the Limit
Being over one limit rarely ends the conversation. Work through these in order:
1. Check for a qualifying category. For the grant, a job in public service, education, or health care can substitute for the income test.
2. Look at the second liens. They carry no income limit of their own, though they come with higher credit floors and, for the repayable version, a monthly payment and a year-10 balloon.
3. Consider a different first lien. If USDA’s 115% cap is the problem, FHA has no income cap, though the property type and location requirements differ.
4. Compare the cost. A forgivable second with no payment and a repayable second with a balloon are very different commitments. The right choice depends on how long you expect to stay and how tight your monthly budget runs.
The flip point is simple. If you plan to stay in the home for years and your credit clears 640, the forgivable structure usually asks the least of your monthly budget. If you need help with closing costs and have room for a second payment, the repayable option at 5% does more. If you qualify for the grant, it asks for nothing back. Which one fits is a function of your income, your credit, and how long you will hold the home.
What Sits Underneath: The FHA Basics
Every option here can sit on an FHA first lien, and when it does, the FHA mechanics still apply. The minimum investment is 3.5% of the lesser of price or appraised value, producing a first lien at 96.5% leverage. There is a 1.75% upfront mortgage insurance premium, which can be financed into the loan, plus annual mortgage insurance that varies by tier. One-unit FHA loan limits in 2026 run from $541,287 to $1,249,125 depending on county.
Property type matters too. The grant covers one-to-four-unit primary residences, FHA-approved condominiums, and PUDs. The second-lien options cover single-family detached or attached homes, condominiums, and PUDs.
And the occupancy rule is firm: owner-occupied primary residence only. Assistance is not available for a second home, vacation home, or rental.
Key Terms Defined
Area median income (AMI): The midpoint household income for a county or metro area, adjusted for household size, used by programs to set eligibility.
Household income: The combined income of the people the program counts, which on USDA includes all adult household members.
Forgivable second: A second loan with no interest and no payment that is erased after a set number of on-time first-lien payments.
Balloon: A lump-sum balance due at a set point, in year 10 on the repayable second.
Underserved census tract: A neighborhood designated as underserved, which can qualify a buyer for the grant regardless of income.
Representative credit score: The score a lender uses for the file, generally the lowest middle score among borrowers.
Frequently Asked Questions
Do I have to be a first-time buyer to get down payment assistance?
No. Repeat and move-up buyers qualify for all of the options described here. First-time status is only one of the qualifying categories for the grant, which also opens to first responders, educators, medical workers, civil servants, military personnel, and buyers in underserved tracts. Anyone buying a primary residence can check whether a structure fits.
Can I use assistance if I earn too much for the grant?
Possibly, through the second-lien options. The forgivable and repayable seconds carry no income limit of their own, and USDA’s cap applies only when the first lien is USDA. They do carry higher credit floors, 640 for the forgivable and 660 for the repayable, and the repayable version adds a monthly payment and a year-10 balloon. Qualification is subject to lender guidelines and full underwriting.
Does USDA count my roommate’s or adult child’s income?
It counts the income of all adult household members toward the 115% limit, according to USDA’s flyer. Deductions for dependents, an elderly household member, and certain childcare and medical expenses can lower the adjusted figure. Ask a lender to run the household both ways before you fall in love with a rural property.
Does assistance work on a rental or second home?
No. Down payment assistance of the kind described here is for an owner-occupied primary residence only. It cannot fund a vacation home or an investment property.
Where do I confirm the current income limit?
For USDA, use the agency’s property eligibility site, where county limits are published and updated periodically. For state or local programs, go to the sponsoring agency or an HUD-approved housing counselor. A lender can then confirm how the limit applies to your documented income.
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. Lendmire is a mortgage broker arranging these through wholesale lenders, subject to program guidelines and full underwriting, and nothing here is a commitment to lend. Start with the down payment assistance programs page to see the options side by side. Tax treatment can depend on your situation; buyers should speak with a qualified tax professional before relying on any deduction or credit.
If a large down payment is on your mind for a bigger purchase, Lendmire’s piece How Much More Down Payment Keeps a W-2 Buyer Under the Jumbo Loan Limit covers the other side of the leverage question.
About Lendmire
As a mortgage broker (NMLS# 2371349), Lendmire helps home buyers in 16 states pair an FHA, USDA or HUD-184 first lien with a down payment assistance option arranged through wholesale lenders. Lendmire is never the lender; program terms are set by the lender and the agency guidelines. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD FHA Resource Center, “How can FHA help me buy a home?”
2. USDA Rural Development, SFH Guaranteed Loan Program Overview 101
3. San Diego Housing Commission, First-Time Homebuyers
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 To Qualify For Down Payment Assistance As A Repeat Buyer · Grant Vs Forgivable Vs Repayable Down Payment Assistance Explained · Does Down Payment Assistance Have to Be Paid Back?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.