The Quick Read: Most buyers miss down payment assistance because they assume it is out of reach or meant for someone else. It is often available to the buyers who rule themselves out: repeat buyers, middle-income households, and people with modest savings. It comes in four shapes, and each one sits on top of a government-backed first mortgage. Knowing which shape fits your situation is most of the work.
Key Takeaways
- You do not have to be a first-time buyer. Repeat and move-up buyers can qualify for the options Lendmire arranges.
- Assistance comes as a grant with nothing to repay, a forgivable second loan, a repayable second loan, or help with refinance costs.
- It works only on an owner-occupied primary residence. It never applies to a rental or a second home.
- The assistance and the first mortgage are two separate approvals. You need a yes on both.
- Programs are set by percentages of price or value. Your file is underwritten individually, and programs can change.
What Is Down Payment Assistance, Really?
Down payment assistance is money that helps you meet the minimum cash a mortgage requires. It usually covers part or all of the down payment, and sometimes closing costs. It is attached to a government-backed first mortgage: FHA, USDA, or HUD-184 (a loan guarantee for Native American and Alaska Native borrowers).
Lendmire is a mortgage broker. It arranges these purchases through wholesale lenders, and the lender underwrites the file. Across the programs it places files with, the mechanics are consistent. Lendmire’s down payment assistance programs come in the four shapes below.
The FHA loan is the foundation for most of these files. It requires a minimum investment of 3.5% from you. That leaves 96.5% for the first mortgage. An upfront mortgage insurance premium is added to the loan, and you can finance it into the balance. Annual mortgage insurance is also charged, and its level depends on your loan size and leverage. FHA one-unit loan limits vary by county, so confirm current figures with a qualified local professional.
Assistance does not replace that foundation. It helps you fund the 3.5%, and sometimes more.
Why Do Buyers Miss It?
Buyers miss it mostly through awareness and assumption, not ineligibility. An Urban Institute report found that 53 percent of surveyed renters named the down payment as a reason they rent. It also found that many consumers do not know low-down-payment loans and assistance exist. More recent reporting from WTOP says a large share of FHA purchase borrowers may have been eligible for assistance, while only a small share actually used it.
Here are the usual self-eliminations, and what is actually true.
| What buyers assume | What is true | What to do |
|---|---|---|
| “I earn too much.” | The second-lien options carry no income test | Ask about all four shapes |
| “I owned a home before.” | No option requires a first-time buyer | Say you are a repeat buyer |
| “It’s a handout.” | Only the grant has nothing to repay; the rest are loans | Read the terms before deciding |
| “I need 20% down.” | FHA requires a 3.5% minimum investment | Ask how assistance can fund it |
| “My lender never mentioned it.” | Not every lender offers it | Ask directly, or use a broker |
| “My credit is too low.” | Floors start at 620 | Ask what your score allows |
The lender side matters too. A loan officer who does not work with these programs cannot surface them. The buyer then assumes nothing exists. A broker with several wholesale channels can check more programs against one file.
How Do the First Lien and the Assistance Get Underwritten?
They are underwritten together, but approved in sequence. The first mortgage is reviewed on its own merits, and the assistance is then checked against the program’s rules and the first lien’s rules. Here is the sequence.
1. Choose the first mortgage. FHA fits the grant. FHA, USDA, and HUD-184 fit the forgivable and repayable seconds.
2. Run an automated underwriting check. The assistance options follow the finding of that automated review, called an AUS. The repayable second requires an AUS approval. The forgivable second allows manual underwriting.
3. Check credit. Each shape has its own floor, listed below. Co-borrower scores can sometimes be blended on the second-lien options.
4. Count the payment. A repayable second carries a monthly payment. The lender counts it in your debt picture. A forgivable second has no payment.
5. Complete any education. The grant requires an HUD-approved homebuyer course. You pay up front, and the cost is credited back at closing.
6. Close. The first lien records first and the second lien after it. A second lien is a real loan with its own disclosures.
Blended scores work this way. A lower-scoring co-borrower’s score is averaged in when the main wage earner makes at least 60% of household income and holds the higher score. The minimums then become 660 for the forgivable second and 670 for the repayable one.
The Four Shapes, Side by Side
Four structures cover most buyers. Each is subject to program guidelines and full underwriting.
| Shape | Repay? | Credit floor | First lien |
|---|---|---|---|
| Grant | Nothing to repay | 620 | FHA only |
| Forgivable second | No, if payments stay on time | 640 | FHA, USDA, HUD-184 |
| Repayable second | Yes, with balloon | 660 | FHA, USDA, HUD-184 |
| Refinance-cost second | Yes, same terms | 660 | FHA refinance |
The grant
The grant covers 2% or 3.5% of the purchase price toward your FHA minimum investment. Nothing is repaid. It is released at closing with no lien, no payment, and no interest. It is available on one-to-four-unit homes, and it works with the main FHA purchase and renovation products, but not high-balance FHA loans.
Eligibility is “any one of the following.” Your household income can be at or below 140% of the area median income. Or you can fit a qualifying category: a first responder, an educator, medical personnel, a civil servant, military personnel, a first-time buyer, or a buyer in an underserved census tract. The grant is not offered in Washington. It cannot be combined with any other assistance program.
The forgivable second
The forgivable second is 3.5% of the lesser of price or appraised value. It carries no interest and no monthly payment. It is fully forgiven after the first 36 or 60 on-time first-lien payments, depending on the version. Credit floor is 640, and 660 on a blended score. It pairs with FHA, USDA, or HUD-184 first liens on one-to-two-unit homes. It has no income limit beyond USDA’s own limits on a USDA first lien, and no counseling requirement.
Public programs show how this structure looks elsewhere. NJHMFA offers an example of a forgivable second with no monthly payment. Their terms are their own, not Lendmire’s.
The repayable second
The repayable second is 3.5% or 5% of the lesser of price or value. At 5%, it also covers closing costs and prepaid items. It is a real loan: interest-bearing, with a monthly payment, a 30-year amortization, and a balloon due in year 10. It has its own loan disclosures and its own balloon disclosure. No lender fees apply to the second, only items like prepaid interest and recording.
The credit floor is 660, or 670 blended. High-balance first liens are allowed. Manual underwriting is not. There is no income limit beyond USDA’s on a USDA first lien.
Treat the balloon seriously. A balloon in year 10 means you plan to refinance, sell, or pay it off by then. If you will likely stay in the home that long, price that in.
The refinance-cost second
The refinance-cost second is the least known. It covers 1% to 3.5% of the lesser of your current balance or the appraised value, toward the closing costs of an FHA refinance. Combined leverage can reach 104%. It has the same repayment terms as the repayable second, with a 660 credit floor (670 blended). It is not available on a streamline refinance, and it cannot refinance an existing assistance loan.
Do You Have to Be a First-Time Buyer?
No. No option requires it, and repeat buyers qualify. The three-year “first-time” definition is just one of the grant’s qualifying categories. Under it, you count as first-time if you had no ownership interest in a residential property in the three years before applying. A homemaker or single parent whose only ownership was with a former spouse can count too.
That makes the title’s own premise a trap. Buyers who sold a home years ago, or who are moving up, often assume the “first-time” label shuts them out.
Income works the same way. The grant has the 140% area-median-income test unless a category applies. The second-lien options have no income limit beyond USDA’s own.
One thing does not bend. Assistance is for an owner-occupied primary residence only. It does not apply to rentals, vacation homes, or second homes.
Where Does the General Rule Break?
The rules above hold for most files. A few edge cases change the answer.
- Stacking. None of the options can be combined with another assistance program. A mortgage credit certificate is also not permitted with the second-lien options.
- Unit counts. The grant allows one to four units. The second-lien options allow one to two.
- USDA. USDA does not require a down payment. A second lien on a USDA file therefore matters mostly for closing costs and fees. USDA’s own income limits still apply.
- HUD-184. The 184 program guarantees the first loan. It does not provide assistance itself. Tribes and tribal housing entities may offer help, and their funding rules vary.
- Property types. The grant covers one-to-four-unit homes, FHA-approved condominiums, and PUDs. The second-lien options cover single-family homes, condominiums, and PUDs. Unique property types are excluded.
- Repairs. Second-lien options allow minor non-structural repairs of up to $5,000. 150% of the estimate is escrowed, and the work must be completed afterward, with timing that varies by file and lender.
- Credit. Floors differ by shape, and the numbers above are minimums, not promises.
- Funding. Some programs run out or pause. A program that exists on a website may not have money available.
The grant and the seconds also differ in what they do to your numbers. A grant adds no debt. A repayable second adds a payment. A forgivable second adds no payment, but it is still a lien until forgiven.
Where Do You Find Assistance?
Start with three places: a broker or lender that works with several programs, your state housing finance agency, and local city or county programs. Many public options also come from nonprofits, employers, and Federal Home Loan Bank member programs.
The CFPB notes that many states, local governments, and nonprofits run affordability programs. Many focus on low- and moderate-income buyers. Some serve past owners, public-service workers, or specific neighborhoods. Many work with a regular FHA or conventional loan.
Public programs often come with their own rules. CalHFA’s MyHome program is one example. It is a deferred-payment junior loan tied to homebuyer education, owner-occupancy, and income limits. The takeaway is that public programs frequently cap assistance and add recapture periods. Compare those terms against the options above.
A few ways to check if a program is real and open:
- Ask the program administrator whether funds are currently available.
- Confirm your lender participates in that specific program.
- Ask what education, income, and price rules apply.
- Get the terms in writing before you make an offer.
What Does the Decision Look Like in Practice?
Picture a renter with steady income and modest savings. She could meet the 3.5% FHA minimum, but it would drain her cushion. If she is a teacher, the grant may fit. The 3.5% grant would cover the full minimum investment, and nothing is repaid. If she is not in a qualifying category, her income might still be at or below 140% of area median.
Now picture a repeat buyer moving up. Perhaps he sold a home years ago and believes assistance is closed to him. The second-lien options carry no income limit and do not require a first-time buyer. His choice is between a forgivable second and a repayable one. The forgivable second costs nothing monthly but ties him to 36 or 60 on-time payments. The repayable second adds a payment and a year-10 balloon, but can reach 5% and cover closing costs.
A third buyer wants to refinance an FHA loan. A refinance-cost second might cover part of the closing costs. Combined leverage can reach 104%.
The decision is a tradeoff. The grant is cleanest but has eligibility gates. The forgivable second is nearly as clean but needs patience. The repayable second gives the most cash help and the most obligation. Lendmire’s role is to compare these against your file through wholesale lenders, subject to program guidelines and full underwriting.
Treat the assistance as a cash-preserving tool, not a reason to stretch the price.
Key Terms Defined
Down payment assistance: Money from a program that helps you meet the minimum cash required to buy, sometimes including closing costs.
Grant: Assistance with nothing to repay. It is released at closing, with no lien, payment, or interest.
Forgivable second: A second loan on the home with no interest or monthly payment. It is forgiven after a set number of on-time first-lien payments.
Repayable second: A second loan with interest, a monthly payment, and a balloon due in year 10.
Balloon: A large lump-sum payment due at the end of a set period, before the loan is fully paid down.
Area median income: The middle household income for your area. Some assistance sets income tests as a percentage of it.
AUS: Automated underwriting system, the software finding a lender uses to review your file.
Frequently Asked Questions
Do I have to repay down payment assistance?
It depends on the shape. The grant has nothing to repay. The forgivable second is forgiven if you make the first 36 or 60 first-lien payments on time. The repayable second and the refinance-cost second are loans, with payments and a balloon in year 10.
Do I have to be a first-time buyer to qualify?
No. None of the options requires you to be a first-time buyer, so repeat and move-up buyers can qualify for the options Lendmire arranges.
Is there an income limit?
The grant uses a 140% of area median income test, unless you fit a qualifying category such as first responder, educator, medical worker, civil servant, military, or a buyer in an underserved census tract. The second-lien options have no income limit beyond USDA’s own on a USDA first mortgage.
Can I use assistance on a rental or second home?
No.
Can I combine assistance with another program?
No. None of the options can be combined with another down payment assistance program. Pick the single structure that fits your file best.
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. Everything is subject to program guidelines, full underwriting, and lender approval. This 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 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. Urban Institute: Barriers to Accessing Homeownership
2. WTOP: Down payment help is everywhere, so why aren’t more first-time buyers using it?
4. CFPB: Special loan programs
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 Occupancy Rules for Relocating Buyers · Down Payment Assistance Funding Rules for New Construction Buyers · Down Payment Assistance First-Time Buyer Rules for Prior Homeowners
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.