The Quick Read: What you owe when you move depends on the shape of your assistance, not on one national schedule. A grant has nothing to repay. A forgivable second lien is forgiven only if you stay and pay on time. A repayable second lien is a real loan you pay down monthly and settle when you sell. The note you sign sets the exact terms.
Key Takeaways
- Four shapes exist: a grant, a forgivable second, a repayable second, and a refinance-cost second. Each has a different exit.
- Selling, refinancing, or moving out of the home as your primary residence are the events that matter most. Check which of them your note treats as a trigger.
- Repeat and move-up buyers qualify. No option requires you to be a first-time buyer.
- Assistance is for an owner-occupied primary residence only. Turning the home into a rental changes the picture.
- Ask for the note and the payoff terms before you sign, not the week you list the house.
Four Shapes, Four Different Exits
Every assistance option is one of four things, and the shape tells you most of what you need to know about moving. The table below shows how each one behaves. Percentages refer to price or value, since the amount depends on your file.
| Shape | Lien on the home? | Monthly payment? | If you move |
|---|---|---|---|
| Grant | No | No | Nothing to repay |
| Forgivable second | Yes | No | Balance due until forgiven |
| Repayable second | Yes | Yes | Paid off at sale; balloon in year 10 |
| Refinance-cost second | Yes | Yes | Same terms as repayable second |
Across the wholesale programs Lendmire places files with, these are the structures that come up again and again. Buyers often search for down payment assistance programs thinking of one product. In practice the four behave very differently when the For Sale sign goes up.
Here is the part that surprises people. Nobody has to be a first-time buyer. A renter buying a first home and an owner moving up can both use these options, subject to program guidelines and full underwriting.
How the First Lien and the Assistance Get Underwritten
The assistance never stands alone. It sits next to a government first mortgage, and the file is built in a set order.
1. The first lien comes first. Your FHA, USDA, or HUD-184 loan stays in first position. FHA is the common one: a 3.5% minimum investment, which means 96.5% first-lien leverage, plus an upfront mortgage insurance premium that can be financed into the loan. Annual mortgage insurance is added by tier.
2. The assistance attaches second. The grant goes with FHA first liens only. The forgivable and repayable seconds also pair with USDA and HUD-184 first liens, subject to program guidelines.
3. The credit floor is checked. The grant starts at 620. The forgivable second starts at 640. The repayable second and the refinance-cost second start at 660. A blended score can apply on the second-lien options when a lower-scoring co-borrower is averaged in under set conditions.
4. Automated underwriting weighs in. The assistance options follow the automated finding. Manual underwriting is allowed on the forgivable second and not on the repayable second.
5. The monthly math differs. A repayable second adds a payment that counts in your debt-to-income ratio. The grant and the forgivable second carry no payment, so they do not add one.
That last step matters for moving. The payment you qualify with today is also the payment you carry until you sell. A deferred balance sitting quietly on title does not raise your monthly bill, but it still reduces what you walk away with.
If your income is irregular, Lendmire’s guide to qualifying for down payment assistance when you’re self-employed walks through how that file gets built.
Key Terms Defined
Lien: A legal claim against your home that must be settled before the title is clear. A second lien ranks behind the first mortgage.
Forgivable second: A loan that disappears if you meet its conditions, such as staying in the home and paying the first mortgage on time.
Balloon: A large lump-sum payment due at a set point, after smaller payments that did not pay the loan off.
Subordination: An agreement by the second-lien holder to stay behind a new first mortgage, usually needed when you refinance.
Payoff statement: The written figure a lender gives you showing exactly what is owed on a loan on a given day.
Trigger event: Something written into the note that makes the balance due, such as a sale or moving out.
The Grant: Nothing to Repay
The grant is the simplest exit. It is 2% or 3.5% of the purchase price, applied toward your FHA minimum investment. It is released at closing. There is no lien, no payment, and no interest, so a move years later does not involve it at all.
The trade-off is in the front end. The grant requires a 620 credit score, an HUD-approved homebuyer education course, and an eligibility test. Your household income must be at or below 140% of area median income, unless you fall into a qualifying category. Those categories include first responders, educators, medical workers, civil servants, military personnel, first-time buyers, and buyers in underserved census tracts. It pairs only with a standard FHA first lien and is not offered in Washington. It cannot be combined with any other assistance program. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
One caution about labels. Some people say “grant” when they mean a forgivable loan. If your paperwork includes a note and a deed of trust, you have a lien, not a grant. Ask which one you are signing.
The Forgivable Second: Staying Is the Price
The forgivable second is 3.5% of the lesser of price or appraised value. It carries no interest and no monthly payment. It is forgiven after the first 36 or 60 on-time payments on your first mortgage, with no 90-day-or-greater delinquency. Choose between the three-year and five-year versions based on how long you expect to stay.
Moving before the count finishes is where this one bites. Say you pick the five-year version and relocate for work after two years. You have made about 24 of the 60 payments. The second is still a loan secured against the home, so a sale would pay it off from your proceeds at closing. Some notes reduce the balance for time served. Others treat forgiveness as all-or-nothing at the end. This is a genuine toss-up between structures, and the note is the only place to see which you have.
Late payments also matter. A 90-day-or-greater delinquency on the first mortgage can break the forgiveness count. Think of it as a rule about the first loan that affects the second.
Moving out matters as well. Many public programs make assistance due when the home stops being your primary residence, and that is a common trigger in the notes this kind of second lien uses. Renting the house out for a year before you decide to sell can accelerate repayment rather than defer it.
The Repayable Second: A Real Loan With a Real Exit
The repayable second is 3.5% or 5% of the lesser of price or appraised value. At 5%, it also covers closing costs and prepaid items: the 3.5% minimum investment plus 1.5% toward closing costs. It is a loan, and it is described as one. It bears interest, has a monthly payment, and amortizes over 30 years with a balloon due in year 10. It carries its own loan disclosure and its own balloon disclosure.
For moving, the picture is plain. You pay it monthly while you own the home. When you sell, the payoff comes out of your proceeds along with the first mortgage. If you stay the full ten years, the remaining balance comes due as a lump sum, so you either sell, refinance, or pay it off. The balloon is the reason a ten-year horizon deserves a plan.
This option has one more feature worth knowing. It permits higher-balance first liens than the other options, and FHA’s current one-unit limits run from $541,287 to $1,249,125 by county. It does not allow manual underwriting.
The Refinance-Cost Second: Same Exit, Different Moment
The refinance-cost second is the odd one out. It is 1% to 3.5% of the lesser of your current first-lien balance or appraised value, toward the closing costs of an FHA refinance, with combined leverage up to 104%. It cannot be used on a streamline refinance, and it cannot refinance an existing assistance loan. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
Its repayment terms match the repayable second: monthly payment, 30-year amortization, balloon in year 10. A buyer who refinances with it and then moves in a few years settles it at the sale, just like the repayable version.
Where the General Rule Breaks
A rule like “assistance is repaid when you sell” holds for most files. These are the places it bends.
Renting the home out. Assistance supports an owner-occupied primary residence. A note may make the balance due when you stop living there. Treat a plan to rent the home as a reason to read the note first.
Refinancing. A refinance generally pays off the first mortgage, and the second lien then has to be paid off or agree to stay behind the new loan. USDA’s guaranteed-loan handbook says a silent second for down payment help cannot be rolled into a new USDA loan. It must be paid off or subordinated. If the holder will not re-subordinate, the refinance may not work. That is a real constraint on a refinance a few years in.
Transfers and life events. Selling, transferring title, and death are commonly treated as repayment events. Public programs often list them together. For example, Indiana’s housing agency describes its second as due at maturity, on sale, on refinance, or when the home stops being the primary residence. Your note may differ, so read yours.
The HUD-184 first lien. Section 184 is a loan guarantee. HUD’s handbook says the program does not lend, give down payment assistance, or issue grants. Any assistance comes from another provider, and its terms come from that provider’s documents.
A payment-free second is still a loan. “No monthly payment” does not mean “no debt.” A deferred or forgivable second stays on title until it is forgiven or paid.
Public programs differ. State housing finance agency programs come in a mix of forms: repayable seconds, deferred or forgivable seconds, and grants. If a friend tells you their program works one way, it may not match the options above.
What the Federal Rules Actually Say
Federal agencies set limits for the first mortgage and for any second lien, but they do not publish one repayment schedule. The repayment terms come from the note.
Two rules are worth knowing. For HUD-184 loans, 24 CFR 1005.439 says a junior lien must become due on sale or refinance unless HUD approves otherwise. It must allow prepayment without a penalty. It also cannot have a balloon payment before 10 years without HUD approval.
FHA applies a similar ten-year balloon limit to secondary financing. A Handbook 4000.1 update from HUD notes that the ban on a balloon within the first ten years does not apply to Federal Home Loan Bank set-aside programs. That is why a balloon in year 10 is a common structure.
Matching the Option to How Long You Plan to Stay
Think about your timeline before you think about the amount.
- Staying ten years or more: The grant is the cleanest. The repayable second works too, but plan for the balloon.
- Staying about three to five years: The forgivable second can be the strongest play, since it is forgiven after 36 or 60 on-time first-lien payments. Once forgiven, it is gone.
- Staying less than three years: The grant carries no repayment. The forgivable second risks payoff at sale. The repayable second means a monthly payment for a short time.
- Likely to move for work: Compare the grant against the forgivable second with the 36-payment forgiveness period. A shorter window leaves less exposure.
- Planning to rent the home later: Read the occupancy language first, since a note can make the balance due at that point.
The grant also has an income test that the second liens skip. The second-lien options carry no income limit beyond USDA’s own on a USDA first lien, though their credit floors run higher than the grant’s. So the most affordable exit and the easiest approval are not always the same option. A thin-savings buyer who runs into the grant’s income test may land on the forgivable second instead. Honestly, that is a good result if the move is five years out.
None of these options stack. You cannot pair one with another assistance program, and a mortgage credit certificate is not permitted with the second liens. Each file is underwritten individually, through wholesale lenders, subject to program guidelines.
Your Pre-Move Checklist
When you sell or refinance, work through this order.
1. Find your note and deed of trust. Look for the trigger events, the forgiveness count, and any proration language.
2. Confirm your shape. A grant has no lien. Anything with a recorded lien is a loan.
3. Count your payments. On a forgivable second, tally your on-time first-lien payments against 36 or 60.
4. Request a payoff statement. Ask for it before you list, then again before closing.
5. Check your occupancy. If you rented the home, flag it before you ask for a payoff.
6. Tell your closing agent. The title company puts the payoff on the settlement statement and pays it from proceeds.
7. If refinancing, ask about subordination early. The second-lien holder has to agree, and that can hold up a refinance.
Frequently Asked Questions
Do I repay down payment assistance if I sell early?
It depends on the shape. A grant has nothing to repay. A forgivable second is due from sale proceeds if you sell before it is forgiven, and the note says whether any credit is given for time served. A repayable second is settled at sale like any other mortgage.
Is a grant really free of conditions?
The grant has nothing to repay once released at closing. It still has conditions at the start: a 620 score, a homebuyer education course, and the income test or a qualifying category. It is for an owner-occupied primary residence only.
Does renting the house out trigger repayment?
Often, yes. Assistance supports a primary residence, and many notes make the balance due when you stop living there. Read the occupancy and trigger language in your own documents before you rent.
Can I refinance with a second lien on the home?
Sometimes, with cooperation. The second has to be paid off or agree to stay behind the new loan. For USDA loans, a silent second cannot be rolled into the refinance. If the holder will not subordinate, the refinance may not be possible.
Does it affect my monthly budget or debt-to-income?
A repayable second adds a monthly payment that counts toward your ratio. The grant and forgivable second carry no payment. A forgivable or deferred balance still reduces your net proceeds at sale.
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. This is not a commitment to lend, and terms are subject to lender guidelines and full underwriting.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage serving home buyers in 16 states. Down payment assistance programs are arranged with FHA, USDA and HUD-184 first liens through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD
2. USDA Rural Development – HB-1-3555 Chapter 6
This article is part of Lendmire’s down payment assistance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can a Move-Up Buyer Who Still Owns a Home Get Down Payment Assistance? · Is Down Payment Assistance Reported as Income by Program Type? · Down Payment Assistance Property Rules for a Condo or Townhome
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.