The Quick Read: “Ratio” means three separate tests on an FHA file with assistance: loan-to-value on the first lien, combined loan-to-value across all liens, and debt-to-income. Which tests the assistance touches depends on its shape. A grant adds no monthly payment, a forgivable second adds none during the forgiveness period, and a repayable second adds a payment that feeds directly into your debt-to-income ratio. Across the wholesale programs Lendmire places files with, down payment assistance programs come in four shapes, and picking the right one often matters more than the headline percentage.
Which “Ratio” Are We Talking About?
Three different measurements get called “the ratio,” and mixing them up causes most of the confusion.
- Loan-to-value (LTV): the first mortgage divided by the lesser of price or appraised value. FHA’s standard purchase structure is 96.5%.
- Combined loan-to-value (CLTV): the first mortgage plus every other lien, divided by value.
- Debt-to-income (DTI): monthly obligations divided by gross monthly income. The front-end ratio counts housing costs only. The back-end ratio adds every other monthly debt.
Assistance behaves differently in each test. The sections below take them in order.
How Does the First Lien Work Underneath?
The first lien is an ordinary FHA purchase loan. The minimum required investment is 3.5% of the lesser of price or appraised value, which gives the 96.5% first-lien leverage. That tier applies at a representative credit score of 580 or higher. Between 500 and 579, the required investment rises to 10%. HUD’s Mortgagee Letter 2026-11 confirms that a decision score below 500 is not eligible, and it adds newer scoring models to the ones lenders may use. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
The assistance options carry their own higher credit floors, so you must clear both. The grant starts at 620. The forgivable second starts at 640, and the repayable second at 660. Every figure here holds through wholesale lenders, subject to program guidelines and full underwriting.
Two more FHA mechanics matter for the ratios. The upfront mortgage insurance premium is a percentage of the base loan and can be financed into the loan. Annual mortgage insurance is charged monthly, and it counts as part of your housing payment. The one-unit FHA loan limit varies by county, with higher limits in higher-cost areas.
How Is the Assistance Underwritten, Step by Step?
Here is the order a file follows.
1. Pick the first lien. The grant pairs with FHA first liens only. The forgivable and repayable seconds also pair with USDA and HUD-184 first liens.
2. Pick the assistance shape. This is the key decision, covered in the next section.
3. Disclose it at application. A second lien is a loan. It appears on your Loan Estimate and Closing Disclosure like any other lien. A repayable second also gets its own separate disclosures, including one for the balloon.
4. Run the file through automated underwriting. Most FHA files go through HUD’s TOTAL Scorecard, which returns “Accept” or “Refer.” Per HUD’s TOTAL page, the lender cannot approve or deny on the TOTAL result alone. A “Refer” goes to a human underwriter.
5. Check the ratios. The housing and total DTI use the full monthly mortgage payment plus other monthly debts.
6. Check CLTV. For the second-lien options, the second counts toward combined leverage.
7. Close. The note and any forgiveness terms are signed at closing.
The assistance options follow the automated finding. FHA’s manual-underwriting benchmark is 31/43. Automated approvals often allow more, but a loan that must go to manual review is a different path. The repayable second does not allow manual underwriting at all. The forgivable second does.
Four Shapes, Four Different Ratio Effects
| Shape | Typical size | Monthly payment? | Counts in CLTV? |
|---|---|---|---|
| Grant | 2% or 3.5% of price | None | No |
| Forgivable second | 3.5% of price or value | None | Yes |
| Repayable second | 3.5% or 5% | Yes | Yes |
| Refinance-cost second | 1% to 3.5% of balance | Yes | Yes, to 104% |
The grant: nothing to repay
The grant is 2% or 3.5% of the purchase price, released at closing. There is no lien, no payment and no interest. It pairs with FHA 203(b), repair escrow, Limited 203(k) and Standard 203(k) first liens at 96.5% LTV, on one to four units. Because no lien exists, both CLTV and DTI are untouched. The credit floor is 620. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
Eligibility is the catch. Any one of these qualifies you:
- household income at or below 140% of the area median income
- a first responder, educator, medical worker, civil servant or member of the military
- a first-time buyer, meaning no ownership interest in a home in the prior three years
- a home in an underserved census tract
An HUD-approved homebuyer education course is required. The grant is not offered in Washington, and it cannot be combined with another assistance program.
The forgivable second: a loan that disappears
This is a lien equal to 3.5% of the lesser of price or appraised value. It carries no interest and no monthly payment. It is forgiven in full after 36 or 60 on-time first-lien payments, with no 90-day-or-worse delinquency along the way. The credit floor is 640, and the first lien can be FHA 203(b), Limited 203(k), HUD-184 or USDA, on one to two units.
HUD does not treat a lien as a gift, even one with no payments or a forgiveness feature. So the forgivable second counts in combined leverage and gets disclosed. It simply adds nothing to your monthly DTI.
The repayable second: this one hits your DTI
The repayable second is 3.5% or 5% of the lesser of price or value. At 5%, it covers the 3.5% minimum investment plus 1.5% toward closing costs and prepaids. It is a real loan: interest-bearing, a monthly payment, 30-year amortization and a balloon due in year 10. The credit floor is 660, and high-balance first liens are allowed.
That monthly payment goes into your total mortgage payment, so it raises both the housing ratio and the total DTI. Manual underwriting is not available, so you need an automated approval. Before choosing this shape, make sure the file still clears the ratios with the second’s payment included. Many buyers skip that step.
The refinance-cost second
This one is for existing FHA homeowners. It provides 1% to 3.5% of the lesser of the current balance or appraised value toward closing costs on an FHA 203(b) refinance. Combined leverage can reach 104%. It is never used on a streamline refinance or to refinance an existing assistance loan. It follows the repayable terms.
Who Sets Which Rule?
| Rule | FHA | Assistance option | Lender |
|---|---|---|---|
| Minimum investment | 3.5% | Satisfies it | Follows both |
| Credit floor | 580 for 96.5% | 620, 640 or 660 | May add more |
| Income limit | None | Grant: 140% AMI test | May add more |
| Ratios | 31/43 manual | Follow the automated finding | Final call |
When two floors conflict, the higher one controls. Lenders may also layer their own requirements on top, which is why two lenders can give different answers on the same file.
A Buyer Scenario in Percentages
Take a renter buying a home. Assume a modeled household with moderate debts and steady income. Run the file two ways at the same price.
With the grant at 3.5%, the minimum investment is covered. The monthly payment is the FHA first lien plus mortgage insurance, taxes and insurance. DTI is unchanged by the assistance.
With the repayable second at 5%, the same buyer also covers some closing costs. But a second payment joins the first. The back-end DTI rises, and if the buyer already carries a car loan and student debt, the file may tip from comfortable to tight.
The grant gives the cleaner ratios. The repayable second gives more cash relief at the table. A buyer with thin savings and a heavy debt load may be able to use the grant but not the repayable second, which is why the order of operations matters.
Do You Have to Be a First-Time Buyer?
No. None of these options requires it. Repeat and move-up buyers qualify. The three-year first-time definition appears only as one of the grant’s qualifying categories. HUD itself does not define the term for these purposes. Most programs use a rule of no home owned within the past three years, but that is a program definition, not an FHA rule.
Every option is for an owner-occupied primary residence only. A second home or rental does not qualify.
Where the General Rules Break
Low credit scores. At 500 to 579, the 3.5% structure is off the table because the required investment rises to 10%. The assistance floors sit above that anyway.
Blended scores. For the second-lien options, a lower-scoring co-borrower’s score can be averaged in. This works only when the primary wage earner earns at least 60% of household income and holds the higher score. The minimums become 660 for the forgivable second and 670 for the repayable, and an automated approval is required.
Family seconds are different. HUD limits a family-member second to a 100% CLTV and bars a balloon within 10 years. Its payments count in the total mortgage payment. That differs from the network’s government-backed assistance structures.
Gift funds are a separate thing. A true gift carries no lien. Sellers, builders and agents cannot supply gift funds. Assistance cannot be combined with another assistance program.
USDA and refinancing. On a USDA first lien, an assistance second cannot be rolled into a new guaranteed refinance. Per USDA’s Handbook 3555 overview, the guaranteed program sits under 7 CFR Part 3555. USDA’s own income limits apply to a USDA first lien.
HUD-184. The Section 184 program itself does not provide down payment assistance. Lenders underwrite those loans. A 2024 Federal Register rule discussed how lien priority interacts with an assistance second, so the lien terms deserve a careful read.
Repairs. The second-lien options allow minor non-structural repairs up to $5,000, escrowed at 150% of the estimate. The completion timeline varies by file and lender.
If Your Ratio Runs Too High
You have a few levers, each with a tradeoff:
- Switch the shape. Moving from a repayable second to a grant or forgivable second removes a monthly payment.
- Pay down other debt. Clearing a car loan helps the back-end ratio.
- Lower the price. A smaller loan lowers every payment.
- Add income. A co-borrower helps, though a lower score may drag the representative score down.
The grant’s income test and the credit floors can block some switches, so check eligibility first.
Key Terms Defined
Combined loan-to-value (CLTV): all liens on the home divided by its value.
Debt-to-income (DTI): monthly debts divided by gross monthly income.
Forgivable second: a lien with no interest or payment that is erased after on-time payments.
Balloon: the full remaining balance of a loan, due at one set date.
Representative score: the credit score a lender uses to qualify the file, usually the lower of the middle scores.
Frequently Asked Questions
Does down payment assistance count as debt in my DTI?
It depends on the shape. A grant and a forgivable second add no monthly payment, so DTI does not change. A repayable second adds a monthly payment that raises both the housing and total ratios. HUD treats any lien-secured assistance as secondary financing, so it is still disclosed and counted in combined leverage.
Can I put nothing down on an FHA purchase?
Often, yes, in the sense that assistance can cover the 3.5% minimum investment. The grant covers 2% or 3.5% of price, the forgivable second covers 3.5%, and the repayable second covers 3.5% or 5%. Savings may still be needed for other costs, and you must meet each option’s credit floor, subject to program guidelines and full underwriting.
Can I stack two assistance programs?
No. None of these options can be combined with another down payment assistance program. A mortgage credit certificate is also not permitted with the second-lien options. Choose the one shape that fits your file.
Does a family loan change my ratio the way a gift does?
No. A true gift carries no repayment, so it adds nothing to your monthly obligations. A family second is a lien, its payments count in the total mortgage payment, and HUD limits it to a 100% CLTV and no balloon within 10 years.
What if I am not buying my first home?
You can still qualify. None of the options requires first-time status. The grant’s 140% area-median-income test is waived for several categories, including first responders, educators, medical workers and civil servants. The second-lien options carry no income limit beyond USDA’s on a USDA first lien.
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. Qualification is subject to lender guidelines and is not a commitment to lend.
Investors who want the broader program framework can review how DSCR loans work.
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 Mortgagee Letter 2026-11
2. USDA
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 Repeat Buyer Get Down Payment Assistance On A Primary Home? · Down Payment Assistance vs Gift Funds From Family · 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.