The Quick Read: It depends on whether the second carries a required monthly payment. A repayable second has a payment, so it goes into your debt-to-income ratio (DTI, your monthly debts divided by your monthly income). A forgivable second or a grant has no payment, so it adds nothing to the monthly ratio. Student loans count either way, and a high income does not change what gets counted.
What Actually Decides Whether the Second Counts?
The structure decides it, not your paycheck. Ask one question: does this assistance require me to pay something every month?
If yes, that payment is a debt, and it lands in your back-end ratio. If no, there is nothing monthly to add. That is why the shape of the assistance matters more than the size of your salary.
Across the wholesale programs Lendmire places files with, there are four shapes. Each sits underneath a government-backed first mortgage, as part of the broader menu of down payment assistance programs a buyer can compare.
| Assistance shape | Monthly payment? | Counts in monthly DTI? |
|---|---|---|
| Grant (2% or 3.5% of price) | None, nothing to repay | No |
| Forgivable second (3.5%) | None, no interest | No |
| Repayable second (3.5% or 5%) | Yes, 30-year amortization | Yes |
| Refinance-cost second (1% to 3.5%) | Yes, same terms as repayable | Yes |
The repayable second is a real loan. It carries interest, a monthly payment, and a balloon due in year 10. Lenders treat that payment like any other obligation.
Does the Grant Touch My Ratio?
No. The grant option is released at closing. There is no lien, no payment, and no interest. It goes toward the FHA minimum required investment (FHA is the Federal Housing Administration, which insures the first mortgage).
Your DTI then reflects only the first mortgage, your other debts, and your student loans. The grant also asks for a credit score of 620 and a homebuyer education course. And it has an income test: household income at or below 140% of area median income, unless you fall into a qualifying category such as educator, medical worker, civil servant, first responder, military, first-time buyer, or a purchase in an underserved census tract. If you earn well, check those categories before assuming you are out. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
What About a Forgivable Second?
A forgivable second has no monthly payment, so it stays out of the monthly ratio. It is forgiven after 36 or 60 on-time first-mortgage payments, depending on the version.
Here is the catch. It is still a lien, meaning a legal claim against your home. A lien counts toward combined leverage, and it reduces your equity until it is forgiven. HUD’s older FHA handbook makes the same point: a “soft” or “silent” second is still secondary financing, not a gift, even if it is eventually forgiven.
So the forgivable second skips your DTI but not your file. Underwriters still see it.
Why High Income Doesn’t Settle the Question
Income is only the bottom half of the ratio. A bigger paycheck helps, but it doesn’t change what goes on top.
High earners often run into trouble from the top half. They carry large student balances, and they may buy bigger homes. A repayable second adds a payment on top of both.
Think of a buyer earning well above the local median who owes a large student balance. If that buyer picks a repayable second, three things stack up: the first mortgage, the second’s payment, and the student-loan payment the lender must count. Swap the repayable second for a forgivable one, and one of those three disappears.
Here’s the honest toss-up. A repayable second gives you more assistance at 5%, including closing-cost help. The forgivable second keeps the monthly ratio cleaner. For a high earner with heavy student debt, the cleaner ratio often wins, though the right answer depends on the numbers in your file.
How Student Loans Get Counted
Student loans always count. That surprises people, because many assume a deferred loan or a $0 income-driven payment drops out of the ratio. It doesn’t.
For FHA, HUD Mortgagee Letter 2021-13 says lenders must include all student loans in your liabilities, regardless of payment type or status. If the payment used is lower than the one on your credit report, the lender needs written proof from your servicer. That proof covers the actual payment, its status, and the balance and terms.
USDA works similarly. Its handbook says lenders use the documented payment when it is above zero. When the payment is zero, they use a set percentage of the balance, regardless of payment status. Older rules used a higher percentage, and that older 1% approach has been replaced. Rules in this area change, so don’t rely on a rule you read years ago.
The practical lesson: for a high earner with a big balance, the qualifying student payment is often the swing factor in DTI, not the assistance.
Two Gates, Not One
Most of the confusion comes from mixing up two separate tests.
Gate one: the assistance. This covers credit score, income limits where they apply, property type, and owner-occupancy. The grant has the 140% area-median-income test unless a category applies. The second-lien options have no income limit of their own, beyond USDA’s limits when the first mortgage is USDA.
Gate two: the first mortgage. This is where DTI, student loans, and the underwriting review live. The lender runs your file through automated underwriting, and the assistance options follow that finding.
A high income can complicate gate one for the grant. It rarely affects gate one for the second liens. And gate two cares about the ratio, not the label on your income.
Eligibility Basics That Surprise High Earners
A few points save people from ruling themselves out.
- No first-time buyer requirement. Repeat and move-up buyers qualify. The first-time definition is just one of the grant’s qualifying categories.
- Owner-occupied primary residence only. No second homes, vacation homes, or rentals.
- No stacking. None of the options combine with another assistance program.
- Credit floors differ. The grant needs 620, the forgivable second 640, and the repayable second 660. Blended scores can apply to second-lien options when a lower-scoring co-borrower is involved, subject to program guidelines.
Beyond DTI: Leverage and What Happens Later
DTI is one test. Combined leverage is another. A second lien adds to total debt against the home’s value, even when it adds nothing monthly. The refinance-cost second, for example, allows combined loan-to-value up to 104% on an FHA refinance.
Later flexibility matters too. If you refinance, the second generally has to be paid off or subordinated, meaning it stays behind the new first mortgage. Assistance loans generally can’t simply be rolled into a new guaranteed refinance. If you sell, any outstanding second gets repaid from the proceeds.
On a repayable second, plan for the year-10 balloon. That is a large lump sum due, and it is the biggest long-term difference from the forgivable version.
Key Terms Defined
DTI (debt-to-income ratio): Your monthly debt payments divided by your gross monthly income. Lenders check a front-end version (housing only) and a back-end version (all debts).
Second lien: A loan secured by your home that sits behind the first mortgage. If you sell or refinance, it is repaid after the first.
Forgivable second: A second lien with no payment and no interest that is erased after a set number of on-time first-mortgage payments.
Balloon: A large lump-sum payment due at the end of a set term, rather than spread over the loan’s full life.
Combined loan-to-value (CLTV): The total of all liens divided by the home’s value.
Subordination: An agreement that a lien stays behind a new first mortgage after a refinance.
What to Do If Your DTI Is Tight
Work the levers in this order.
1. Change the assistance shape. Moving from a repayable second to a forgivable second or grant removes a monthly payment.
2. Document the student loan accurately. If your actual payment is lower than what the credit report shows, get the written servicer letter. Don’t assume the lender will find it.
3. Pay down a small balance. Retiring a small loan can remove its payment entirely.
4. Adjust the purchase. A smaller first mortgage lowers the biggest piece of the ratio.
5. Ask for the automated underwriting finding. The assistance options follow it, and it often allows more than manual limits.
FHA manual underwriting uses ratios of 31/43, and automated approvals commonly allow more. Everything here is through wholesale lenders, subject to program guidelines and full underwriting.
Questions to Ask Your Loan Officer
- Does my assistance carry a required monthly payment?
- How will you count my student loans, and what documents do you need?
- Will the second lien change my combined leverage?
- What happens to the second if I refinance or sell?
- Which version fits my income and credit?
Bring your loan statements, a servicer letter if you’re on an income-driven plan, and your recent pay records.
For related reading, Lendmire’s piece Does a Down Payment Assistance Second Mortgage Count Against Your DTI? goes deeper on the ratio mechanics.
Frequently Asked Questions
Do student loans disqualify me from down payment assistance?
No. Student loans raise your DTI, but they don’t bar you from any of the options. The first-mortgage lender counts them under its program rules and checks whether the whole file still fits.
Does a grant count against my DTI?
No. The grant has nothing to repay, no lien, and no monthly payment, so it adds nothing to the ratio. It still requires a credit score of 620 and a homebuyer education course. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
If my student loans are deferred, can I leave them out?
Usually not. FHA and USDA both require lenders to count student loans regardless of status. The lender may use your documented payment or a percentage of the balance, depending on the program. Ask for the servicer paperwork early.
Can I get assistance if I earn too much?
Often yes. Only the grant has an income test, at or below 140% of area median income, and several categories bypass it. The forgivable and repayable seconds have no income limit beyond USDA’s own on a USDA first mortgage.
Does a forgivable second hurt me later?
It doesn’t add a payment, but it is a lien until forgiven after 36 or 60 on-time payments. It counts toward combined leverage and would be repaid from proceeds if you sold or refinanced before then.
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.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. Down payment assistance options are arranged alongside FHA, USDA and HUD-184 first liens through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. HUD Handbook 4155.1 (superseded, historical)
2. HUD Mortgagee Letter 2021-13
This article is part of Lendmire’s First Time Home Buyer series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: How a Deferred Second Mortgage Hits Your DTI With Down Payment Assistance · Conventional Loan Requirements for a Down Payment Assistance Second Lien · Can You Get Down Payment Assistance While Still Owning a Home?
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.