The Quick Read: It depends on how the assistance is built, not on the first mortgage underneath it. A grant leaves nothing to repay at sale. A forgivable second is forgiven only if you stay through its schedule. A repayable second is a loan, paid off from your sale proceeds. Your signed note settles the question for your file.
What Decides Whether You Owe Anything at Sale?
Five things decide it: whether the assistance is a grant or a lien, the forgiveness schedule, what events trigger repayment, whether anything is added to the payoff, and when you sell.
The type of first mortgage does not decide it. FHA, USDA and HUD-184 loans each sit in first position. Across the wholesale programs Lendmire places files with, the pattern is consistent. A buyer who reads the note knows the answer. A buyer who relies on the word “assistance” is often surprised.
Here is the quick comparison across the four shapes of assistance Lendmire arranges.
| Shape | Owed when you sell? | What triggers repayment |
|---|---|---|
| Grant | No | Nothing; released at closing |
| Forgivable second | Yes, if still unforgiven | Selling before the schedule ends |
| Repayable second | Yes, the remaining loan balance | Sale, refinance, or the year-10 balloon |
| Refinance-cost second | Yes, same as repayable | Sale, refinance, or the year-10 balloon |
The details behind each row matter, so the next sections take them one at a time. Buyers weighing all four can start with Lendmire’s overview of down payment assistance programs.
The Grant: Nothing to Repay
A grant is the only shape with no repayment at sale. The grant option Lendmire arranges covers 2% or 3.5% of the purchase price toward the FHA minimum investment. It is released at closing, with no lien, no payment and no interest. Sell next year or in twenty years, and no balance follows you.
Some limits still apply. The grant pairs only with an FHA first mortgage. It needs a credit score of at least 620. An HUD-approved homebuyer education course is required. It is not offered in Washington. The income test is household income at or below 140% of the area median, unless you fall into a qualifying category. Those include first responders, educators, medical workers, civil servants, military personnel, first-time buyers, and buyers in underserved census tracts.
Be careful with the word “grant” elsewhere. Some programs advertise a grant that is really a forgivable loan. The test is simple. If a lien is recorded against your home, it is a loan, even when no payments are due. A true grant has no lien to release.
The Forgivable Second: Staying Power Matters
A forgivable second is a loan that disappears if you stay long enough. It is 3.5% of the lesser of the purchase price or appraised value. It carries no interest and no monthly payment. It is forgiven after your first 36 or 60 on-time first-mortgage payments, depending on the schedule you choose. A payment that runs 90 days or more late breaks the clean path to forgiveness.
It pairs with FHA, USDA and HUD-184 first mortgages, for one- and two-unit homes. The credit floor is 640. A blended score can qualify at 660 when a co-borrower’s lower score is averaged in. There is no income limit beyond USDA’s own on a USDA loan. Homebuyer counseling is not required.
If you sell before the schedule ends, plan on the unforgiven balance coming due from your proceeds. Whether a note prorates the balance or holds it in full is a document question. Read that line before you list the home. The title company will pull a payoff figure, and the second is paid at the closing table.
The Repayable Second: A Real Loan
A repayable second is an ordinary loan, and you repay it at sale. It is 3.5% or 5% of the lesser of price or appraised value. At 5%, the extra 1.5% goes toward closing costs and prepaid items. It is interest-bearing and carries a monthly payment. It amortizes over 30 years, with a balloon due in year 10.
That structure creates two ways it ends. You sell or refinance and pay the balance from proceeds. Or the balloon comes due at the end of the term the program sets. Plan around that due date from day one. A buyer who expects to stay longer than the balloon term needs a plan for it, usually a refinance or a sale.
Because the payment is required, it counts in your debt-to-income picture. A second lien’s payment, if any, is entered in the underwriting system as a subordinate-lien payment. See the USDA Rural Development loan origination FAQ. The same logic applies to every first mortgage type. A repayable second raises the monthly obligation lenders measure.
Credit floor is 660, or 670 blended. Manual underwriting is not allowed on this shape. The second is a separate consumer loan with its own disclosures, including a balloon disclosure.
The refinance-cost second works the same way. It is 1% to 3.5% of the lesser of your current first-lien balance or appraised value, toward closing costs on an FHA refinance. It follows the same repayment terms as the repayable second.
What Happens at the Closing Table When You Sell
When you sell, the title company pays every lien from your proceeds in a set order, and the assistance second is one of them. Here is the sequence.
1. You sign a listing and accept an offer. Tell your servicer you are selling. Ask for a written payoff on the first mortgage and on the second.
2. The title company orders payoffs. It requests exact figures good through the closing date.
3. Costs and liens come out of proceeds. The first mortgage is paid, then the second, then selling costs.
4. The lien is released. After payoff, the second’s lien should be released and recorded. Keep a copy of the release.
5. You receive what is left. If a forgivable second was already forgiven, no payoff line appears. Ask for the release anyway, since forgiveness should be documented.
For a grant, steps one through four have no assistance line. The home sells like any other.
This sequence applies when sale proceeds cover every lien. If proceeds fall short, the situation becomes a bigger conversation. Talk with your servicer before you list, not after an offer arrives.
Sell Early, Mid-Term, or Late: Three Scenarios
Picture three buyers with the same 3.5% forgivable second on a five-year schedule. The only variable is timing. No dollar figures are needed to see the pattern.
Sell in year two. About 24 payments have been made, so the schedule has not finished. Expect the unforgiven balance to be due from proceeds. If the home has gained little equity, selling costs plus the payoff can leave you with very little cash.
Sell in year four. Still short of 60 payments. The same logic applies, and you are closer to the finish line. If you can wait a year or so without hardship, the wait can erase the second entirely. That is a real option when your move is flexible.
Sell in year six. The schedule is complete, assuming no 90-day delinquency. Nothing is owed on the second. The only remaining task is confirming the lien was released.
Now change the shape. A buyer with a repayable second pays the remaining loan balance in all three scenarios. Waiting does not erase it. It only shortens how long you carry the monthly payment.
One more case is worth running. Say you bought with the minimum 3.5% investment and a 5% repayable second, and prices in your area dipped. After selling costs, the proceeds could barely cover the first mortgage, let alone the second. Thin-equity sales are the main risk of any lien-based assistance. If you might need to move within a few years, the grant or a forgivable second with a short schedule fits better than a repayable second.
Other Events That Trigger Repayment Besides Selling
Selling is only one trigger. Several others can call a second lien due, and the note lists which ones apply.
Refinancing. A refinance pays off the first mortgage, and that commonly triggers the second as well. USDA’s handbook says assistance loans of the “silent” type cannot simply ride along into a new guaranteed refinance. They must be subordinated to the new loan or paid in full, as USDA’s HB-1-3555 Chapter 6 explains. The exact rules differ by provider, but plan on needing an answer before you refinance.
Moving out. Programs require owner-occupancy. Assistance is for a primary residence only, never a second home or rental. Moving out and renting the property can breach the occupancy terms and call the second due. Check the occupancy covenant before you convert a home to a rental.
Transferring title. Deeding the home to a relative, or adding or removing an owner, can count as a transfer. One state housing agency, for example, says in its California Housing Finance Agency FAQ that its subordinate loan becomes due on a sale, a refinance of the first mortgage, a title transfer or an assumption. Other providers write similar triggers, so ask before you change the deed.
Death or divorce. No national agency rule governs these cases. Programs differ. The program agreement controls, and a servicer can explain what it allows.
Assumption. Some FHA and HUD-184 loans may be assumed by a buyer with approval. Whether the assistance second can be assumed too depends on the provider. Do not assume it follows the first mortgage.
Shared appreciation. Some public programs add a share of the home’s gain to the payoff. None of the four options Lendmire arranges work that way, but read any other offer’s terms with that in mind.
Does the First Mortgage Type Change the Answer?
Not for the repayment question. It changes which assistance shapes you can pair with it.
FHA rules require the insured first mortgage to stay in first position. USDA says assistance programs can be used when the guaranteed loan stays first, as its loan origination FAQ explains. USDA also treats the assistance funds as not your own money in its credit test. HUD-184 is a different story. HUD says the program itself does not provide down payment assistance. Any help comes from a tribe, a housing entity or a state agency, and HUD’s Section 184 borrower page tells buyers to check with their tribe or state housing finance agency. That provider’s terms govern repayment.
In Lendmire’s network, the grant pairs only with FHA first mortgages. The forgivable and repayable seconds also pair with USDA and HUD-184. No assistance option can be stacked with another assistance program. A mortgage credit certificate is not permitted with the second-lien options.
FHA underneath means a 3.5% minimum investment, a first mortgage up to 96.5% of value, and an upfront mortgage insurance premium that can be financed. Annual mortgage insurance also applies, and its level depends on the loan size and down payment. One-unit FHA loan limits vary by county.
Do You Have to Be a First-Time Buyer?
No. None of the four options requires it. Repeat and move-up buyers qualify. The three-year first-time definition is only one of the grant’s qualifying categories.
Income limits are narrower than most buyers expect. The second-lien options carry no income limit beyond USDA’s own on a USDA loan. The grant uses the 140% area-median-income test unless a category applies. Many public programs, by contrast, cap income and cap how much they give. Those public programs vary widely, so compare each one’s terms rather than assuming.
Key Terms Defined
Grant: assistance with no lien and nothing to repay, so no balance exists at sale.
Forgivable second: a second loan, with no interest or payment, that is forgiven after a set number of on-time first-mortgage payments.
Repayable second: a second loan with interest, a monthly payment and a balloon due in year 10.
Lien: a recorded claim against your home that must be paid or released when you sell.
Subordinate: ranking behind the first mortgage in payoff order.
Balloon: a lump-sum balance due at a set date, before the loan has fully amortized.
Recapture: a provider’s right to take back some or all of the assistance when a trigger event happens.
Common Mistakes Buyers Make
- Assuming “assistance” means a gift. Many forms are second loans. A forgivable second is a gift only if you stay.
- Mixing up a family gift with assistance. A relative’s gift carries no repayment expectation. A lien-secured second is a loan, even with no payment due.
- Forgetting that refinancing is a trigger. Buyers refinance after a rate shift and discover the second is due. Ask first.
- Treating a deferred loan as costless. It comes due at sale, so it still reduces your proceeds.
- Skipping the release. After forgiveness or payoff, make sure the lien is formally released.
- Counting on assistance for a rental. It applies only to an owner-occupied primary residence.
How to Check Your Own Terms Before You Sign
Pull four documents and read them side by side.
1. The promissory note. It states the repayment trigger and any interest.
2. The recorded deed of trust or mortgage. It shows the lien exists and where it ranks.
3. The program agreement. It sets occupancy terms and any recapture rules.
4. The subordination language. It confirms the second stays behind the first.
Then ask your loan officer five questions. Is this a lien or a grant? What exactly triggers repayment? Is the balance prorated, cliff-based or full? Is there any interest or shared appreciation? What happens if I refinance?
Self-employed buyers often ask whether the same structures work for them. Lendmire’s piece How to Qualify for Down Payment Assistance When You’re Self-Employed covers that angle.
Picking the Shape That Fits How Long You Plan to Stay
If you expect to stay put for years, a forgivable second can work well, because time erases it. If your plans are uncertain, the grant removes the question. If you need closing-cost help and accept a loan, the repayable second at 5% covers both. Only the grant carries no repayment at sale.
The tradeoff is eligibility. The grant needs the 140% income test or a qualifying category, and it pairs only with FHA. The second liens open to more buyers but add a lien.
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. Reach the team at 828-256-2183. Programs run through wholesale lenders, subject to program guidelines and full underwriting. This is not a commitment to lend.
Frequently Asked Questions
Do I owe anything if I sell my home a year after closing?
It depends on the shape. With a grant, nothing is owed. With a forgivable second, the unforgiven balance is generally due from proceeds, since the 36- or 60-payment schedule has barely started. With a repayable second, you pay the remaining balance. Ask for a payoff from your servicer and read your note’s trigger language.
Can I refinance without paying off my assistance second?
Sometimes, but plan on it being a negotiation. A refinance commonly triggers repayment, or the second must be subordinated to the new loan. Silent seconds cannot ride into a new guaranteed refinance without being subordinated or paid. The provider decides whether to subordinate, so ask before you apply.
Is a forgivable second ever repaid if I stay the full time?
Not if you complete the schedule. The second is forgiven after your first 36 or 60 on-time first-mortgage payments, and a 90-day-or-greater delinquency can interfere. After forgiveness, confirm the lien release is recorded so it does not cloud your title later.
Can I use assistance on a home I plan to rent out?
No. Assistance is for an owner-occupied primary residence only. Moving out and renting the home can breach the occupancy terms and call a second lien due.
What if I sell and the proceeds don’t cover the second?
That is a thin-equity sale, and it needs a conversation with your servicer before you list. The first mortgage is paid first, then the second, then your selling costs. A shortfall can mean bringing cash to closing or negotiating with the lien holder. The grant avoids this problem, since it creates no lien.
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.
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References
1. HUD Section 184 Handbook, Chapter II-B
2. USDA Rural Development Single Family Loan Origination FAQ
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 to Be Paid Back? · Can You Use Down Payment Assistance on a Condo or Townhome Purchase? · Can a Repeat Buyer Use Down Payment Assistance Before Selling?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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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.