The Quick Read: Yes, a first-time buyer can get a grant. It comes with conditions, and it is only one of four ways assistance is structured. The grant option has nothing to repay. The other options are second loans, and you must repay or earn them. You also don’t have to be a first-time buyer to qualify for assistance.
What Does “Grant” Actually Mean?
A true grant is money you never repay. It has no lien, no monthly payment, and no interest. Many things marketed as “grants” are really loans with a forgiveness clause, so the label alone tells you very little.
Across the wholesale programs Lendmire places files with, assistance comes in four shapes. All four sit on top of a government-backed first mortgage. Each is a percentage of price or value, not a fixed dollar promise, and each is subject to program guidelines and full underwriting.
| Shape | What you get | Repay? | Credit floor |
|---|---|---|---|
| Grant | 2% or 3.5% of price | Nothing to repay | 620 |
| Forgivable second | 3.5% of price or value | Forgiven after 36 or 60 on-time payments | 640 |
| Repayable second | 3.5% or 5% of price or value | Yes, with a balloon in year 10 | 660 |
| Refinance-cost second | 1% to 3.5% of balance | Yes, same terms as repayable | 660 |
The credit floors are the lowest representative score among all borrowers on the file. For the two seconds with blended scoring, the floors are slightly different, and that comes up below.
Here is the plain version of each one.
The grant is released at closing and goes toward your FHA minimum investment. The 2% and 3.5% options both exist. The 3.5% option lines up with the full minimum, though closing costs are a separate matter. It pairs with FHA first mortgages only, on one- to four-unit homes you will live in.
The forgivable second is a loan, even though it behaves like a grant if you stay put. There is no interest and no payment. The balance is forgiven after the first 36 or 60 on-time payments on your first mortgage, depending on the version. Sell or refinance before then, and the balance comes due.
The repayable second is a real second loan. It carries interest and a monthly payment, amortizes on a 30-year schedule, and ends in a balloon in year 10. At the 5% level, it also covers closing costs and prepaid items. It has its own disclosures, separate from your first mortgage.
The refinance-cost second is for people who already own. It helps with the closing costs on an FHA refinance, and combined leverage can reach 104%.
Do You Have to Be a First-Time Buyer?
No. None of these options requires it. Repeat buyers and move-up buyers qualify, and that surprises many people who assume the whole category is a starter-home perk.
“First-time” shows up in only one place: it is one of several ways to qualify for the grant. The usual definition is no ownership interest in a residential property during the three years before you apply. A homemaker or single parent whose only past ownership was with a former spouse also counts.
One more boundary: assistance is for the home you will live in. It does not apply to second homes, vacation homes, or rentals.
Who Qualifies for the Grant?
The grant has an income test, and it has a way around it. You qualify if your household income is at or below 140% of the area median income. You also qualify, regardless of income, if you fall into one of these groups:
- A first responder (police, fire, public safety, paramedic, EMT), current, former, or entering service
- An educator
- Medical personnel, including nurses, doctors, phlebotomists, health ambassadors, and hospital or Red Cross workers
- A civil servant at the federal, state, or local level
- Military personnel, current, retired, volunteer, or unpaid
- A first-time homebuyer, as defined above
- A buyer purchasing in an underserved census tract
Any one is enough. A higher earner who teaches, or who is buying in an eligible tract, can still qualify.
The grant also requires an HUD-approved homebuyer education course. You pay for the course up front, and the cost is credited back to you at closing. It is not offered in Washington.
The two second loans work differently. They carry no income limit of their own, though a USDA first mortgage brings USDA’s limits along with it. If you want to see all the structures laid out, Lendmire’s down payment assistance programs page covers them.
What Sits Underneath: The First Mortgage
Assistance does not replace the first mortgage. It plugs into one, and the first mortgage sets the base rules.
For FHA, the minimum investment is 3.5% of the lesser of price or appraised value, which means first-lien leverage tops out at 96.5%. That minimum applies to buyers with a representative credit score of 580 or higher. The assistance options carry their own higher credit floors, as in the table. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
FHA also charges an upfront mortgage insurance premium, which you can finance into the loan. Annual mortgage insurance follows, and the amount depends on your loan size and leverage. Current one-unit FHA loan limits vary by county, so confirm the limit for your area with a qualified local professional or your lender.
Which first mortgage pairs with which option matters:
- The grant pairs with FHA first mortgages only.
- The forgivable and repayable seconds also pair with USDA and HUD-184 first mortgages.
- The forgivable and repayable seconds apply to one- and two-unit homes. The grant covers one to four units.
On the FHA side, the program itself does not hand out the money. HUD’s FHA handbook glossary defines a first-time buyer as someone with no ownership interest in another property in the prior three years. It also defines the government entities that may supply assistance. HUD’s definition is for FHA purposes. Each assistance program sets its own conditions on top.
Tribal lending follows the same pattern. HUD’s rulemaking for its Section 184 program says junior liens from tribes and down payment assistance programs remain allowed. A commenter in that Federal Register notice pointed out that many of these “grants” are awarded as forgivable second mortgages. That confirms the labeling problem is real, not just a consumer-forum complaint.
How the Process Works
The steps run in a set order. Skipping one is how files stall.
1. Start with the buyer, not the program. A loan officer looks at your credit, income, and savings, and decides which first mortgage and which assistance shape fit.
2. Complete the application. Your file is run through automated underwriting. The second-lien options require an approval from that system, and the repayable second does not allow manual underwriting.
3. Finish homebuyer education if the grant applies. The course provider issues a certificate your lender needs on file.
4. Find the home. The home must be your primary residence, and it must fit the property rules. Single-family homes, condominiums, and planned unit developments work for the second liens. The grant covers one- to four-unit homes, FHA-approved condominiums, and planned unit developments.
5. Get the disclosures. Your first mortgage has a Loan Estimate and Closing Disclosure. A repayable second is its own loan, so it gets its own disclosure plus a balloon disclosure.
6. Close. The grant is released at closing. The seconds are recorded as liens behind your first mortgage.
The programs follow lender and wholesale guidelines, which change. Every file is underwritten individually, and nothing here is a commitment to lend.
Grant, Forgivable Loan, or Repayable Loan? How to Tell
Ask four questions of any “grant” you are offered.
Is there a lien on the house? A real grant leaves none. A forgivable or repayable second shows up as a recorded lien.
Is there a payment? A grant has none. A forgivable second has none while you stay. A repayable second has a monthly payment from the start.
What triggers repayment? For a forgivable second, selling or refinancing before the forgiveness date does. For a repayable one, the balloon in year 10 does, or a sale or refinance earlier.
What do you have to do to keep it? Staying in the home and making on-time first mortgage payments earns the forgiveness. A delinquency of 90 days or more breaks it.
Be careful with the repayable second in particular. The payment adds to your monthly budget. Think of it as extra debt that happens to help you buy, not a gift.
If a lender cannot tell you which of the four shapes you are looking at, keep asking until they can.
A Buyer Scenario in Plain Words
Take a renter with solid income and thin savings. They have a 660 score, a stable job, and no ownership in the past three years. They want a modest primary home.
The grant looks attractive on paper, and they likely qualify as a first-time buyer. If they hold an educator or nursing job, they would have a second route in. They complete the education course, and the grant covers part or all of the FHA minimum investment, depending on the option chosen.
If income runs above 140% of the area median and no category fits, the grant is closed. The forgivable second is next. It needs a 640 score, or 660 blended, and the buyer would plan to stay long enough to earn the forgiveness. If they might move sooner, the repayable second becomes the realistic fallback. They would budget for the payment and plan for the year-10 balloon.
A repeat buyer in the same spot follows the same logic. Being a repeat buyer does not remove them from any option. The grant’s first-time category is just one of several doors.
Can You Combine It With Other Help?
Mostly no. No option here can be combined with another down payment assistance program. The grant also cannot pair with FHA High Balance, FHA $100 Down, FHA 203(h), FHA Good Neighbor Next Door, or FHA One-Time Close. A mortgage credit certificate, which is a yearly tax credit, is not permitted with the second-lien options.
Gift funds from family are a different category. A gift is not a lien and needs no repayment, but your lender must document where it came from. The gift letter has to name the donor and the relationship, state the amount, and confirm that no repayment is required, per HUD’s FHA guidance on gifts. Whether gift funds can sit alongside a particular assistance option is a question for your loan officer before you sign a contract.
What Happens If You Sell or Refinance Early?
It depends on the shape. The grant has no lien and nothing to repay, so a sale or refinance does not trigger anything. For the forgivable second, selling or refinancing before the 36- or 60-payment mark means repaying the balance. For the repayable second, selling or refinancing pays it off. Staying until the balloon date means a lump sum due in year 10, so plan an exit before then.
On USDA first mortgages, a later refinance has a catch. USDA’s handbook says down payment assistance loans cannot be rolled into a new guaranteed loan. They must be subordinated or paid in full.
So match the structure to how long you realistically plan to stay. A forgivable second rewards staying. It is a poor fit if a move is likely.
Key Terms Defined
Area median income: The midpoint household income for your county or metro. The grant’s income test is measured against it.
Minimum required investment: The 3.5% of price or value that FHA requires you to put into the purchase. Grants, gifts, or savings can supply it, subject to source rules.
Second lien: A loan recorded behind your first mortgage. If you sell, the first mortgage is repaid first.
Balloon: A lump-sum payment due at a set date, instead of being paid down gradually. The repayable second balloons in year 10.
Forgivable: Cancelled if you meet conditions, usually staying in the home and paying on time for a set number of payments.
Blended score: An averaging of credit scores when a lower-scoring co-borrower is added. It applies to the second-lien options only. It requires the primary wage earner to earn at least 60% of household income and to hold the higher score.
What If You Don’t Qualify?
You have options. Several are worth a look before giving up.
- Switch shapes. Failing the grant’s income test does not rule out the second liens.
- Check your credit file. The floors differ by option, so a small score gain can change what is open.
- Try a different first mortgage. Some options pair with USDA or HUD-184 as well as FHA.
- Look at public programs. State housing finance agencies, cities, and counties run their own programs. Common structures include forgivable grants, zero-interest deferred seconds, and fully amortizing second loans. Many cap the assistance, and some add a recapture period. Funds also run out, so confirm a program is open before you count on it in a purchase contract.
- Take the counseling seriously. State agency programs commonly require pre-purchase education, and HUD’s research on housing counseling associates education plus assistance with sustained homeownership among lower-income buyers.
Tax treatment can depend on your situation; buyers should speak with a qualified tax professional before relying on any deduction or credit.
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 licensed for consumer lending in 16 states, and it arranges these options through wholesale lenders. Reach the team at 828-256-2183 or request a quote through Lendmire’s quote form.
Frequently Asked Questions
Is a down payment assistance grant really free money?
No, and the better phrase is “nothing to repay.” The grant option has no lien, no payment, and no interest. You still have to qualify on income or a category, complete homebuyer education, and buy a primary residence. The second-lien options are loans, whether forgivable or repayable.
Can I get a grant if I owned a home before?
Yes, in many cases. The grant’s qualifying categories include first responders, educators, medical workers, civil servants, military personnel, and buyers in underserved census tracts, as well as first-time buyers. Income at or below 140% of the area median also works. If you owned in the past three years, you would need another route in. The second-lien options never require first-time status.
Can I use assistance on a rental or second home?
No. Every option here is for an owner-occupied primary residence only.
Does the grant change my FHA mortgage?
The grant counts toward your minimum required investment and leaves no lien. Your first mortgage keeps its normal FHA rules, including the upfront mortgage insurance premium, which can be financed, and annual mortgage insurance. A second lien does count toward combined leverage, so it affects the underwriting picture differently.
Can I stack the grant with a state program?
Generally no. Talk to your loan officer before applying to a second program so you don’t disqualify yourself.
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. USDA
2. HUD Handbook 4000.1 Glossary (Update 17)
This article is part of Lendmire’s down payment assistance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Down Payment Assistance vs. a Gift for a Cash-Short Conventional Buyer · Repeat-Buyer Down Payment Assistance vs First-Time-Only Grant Programs · Can a Move-Up Buyer Still Qualify for Down Payment Assistance?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.