The Quick Read: Only one of the three shapes adds a second monthly bill, and that is the repayable second. A grant has nothing to repay and leaves no lien. A forgivable second is a recorded lien with no payment that is forgiven if you keep paying the first mortgage on time. The choice comes down to how long you plan to stay, how tight your debt ratios run, and which first lien you are using.
The honest answer on who each option fits is short. The grant suits a buyer who is reviewed on income or a category and wants nothing recorded behind the first mortgage. The forgivable second suits a buyer who expects to stay put for the forgiveness window and wants help without a new bill. The repayable second suits a buyer who needs the largest cushion, including closing costs, and can carry a second payment plus a balloon in year 10.
None of these require a first-time buyer. Repeat and move-up buyers qualify. All of them are for an owner-occupied primary residence only. Second homes and rentals are out.
Across the wholesale programs Lendmire places files with, the same pattern shows up. Buyers compare the up-front help and miss where the cost lands later. This piece sorts that out. Lendmire’s down payment assistance programs page lays out the full menu, subject to lender guidelines and full underwriting.
Side-by-Side
| Factor | Grant | Forgivable second | Repayable second |
|---|---|---|---|
| Repayment | Nothing to repay | Forgiven after 36 or 60 on-time payments | Real loan, balloon in year 10 |
| Lien recorded | No | Yes, 30-year term | Yes, 30-year amortization |
| Monthly payment on the assistance | None | None | Yes |
| Size (percent of price or value) | 2% or 3.5% of price | 3.5% of lesser of price or value | 3.5% or 5% of lesser of price or value |
| Credit floor | 620 | 640 (660 blended) | 660 (670 blended) |
| Income test | 140% of area median, or a category | None beyond USDA’s own on a USDA first lien | None beyond USDA’s own on a USDA first lien |
| First lien pairing | FHA only | FHA, USDA, HUD-184 | FHA, USDA, HUD-184 |
| Counseling | Homebuyer education required | Not required | Not required |
| Closing costs covered | Toward minimum investment | Down payment | At 5%, yes |
Programs change, and every file is underwritten individually. Treat the table as the shape of each option, not a promise.
How Does Each Shape Change Your Monthly Payment?
The repayable second is the only shape that adds a scheduled payment. The grant and the forgivable second leave the first mortgage as your only scheduled housing payment.
That is the core of “shifts your payment.” The cost does not disappear. It moves.
With a grant, the cost moves nowhere. There is no lien and no note. You close with the help already applied to your minimum investment.
With a forgivable second, the cost moves to the future. You owe nothing monthly. But the lien sits behind your first mortgage until forgiven. Sell, refinance, pay off the first, or move out early, and the remaining balance can come due. Miss the on-time payment standard, and forgiveness is at risk.
With a repayable second, the cost lands in the monthly budget. It is a loan. It carries interest, a payment, and a 30-year amortization with a balloon in year 10. That balloon matters. Plan the exit before you sign.
How Do Lenders Count Each One in Your Ratios?
Lenders count a payment, not a lien. A repayable second’s monthly payment is added to your housing expense and recurring debts. A no-payment second is still a lien, and it affects combined leverage.
The older HUD guidance shows the logic. HUD Handbook 4155.1 is a superseded handbook, but it treated monthly payments on both the first and the second lien as part of the borrower’s ability to repay. It also required non-government seconds to carry level payments with no balloon in the first ten years. Current rules differ by source of funds, so treat it as logic, not current text.
USDA works the same way. Its ratio standard sets total debt at 41 percent of repayment income and counts subordinate liens in housing expenses. A repayable second eats into that room. A grant does not.
On the FHA side, the first lien sits on a 3.5% minimum investment, 96.5% first-lien leverage, and a 1.75% upfront mortgage insurance premium that can be financed into the loan. Annual mortgage insurance applies on top. The assistance options sit above that, and the credit floors rise with them. Under FHA’s 203(b) program, a score of 580 or higher qualifies for the maximum 96.5 percent leverage, and gifts, loans, and grants are all recognized down payment sources.
When the Grant Is the Better Fit
The grant is the better fit when you want the cleanest file. Nothing is recorded, nothing is owed, and your ratios are untouched.
Picture a buyer with thin savings and a solid credit profile, buying with an FHA first lien. Household income sits at or below 140% of the area median. Or the buyer is a teacher, a nurse, or a veteran, where a category applies instead. The grant covers 2% or 3.5% of the price toward the minimum investment. It is released at closing.
Pick it when:
- You want no lien behind the first mortgage.
- You plan to sell or refinance on an uncertain timeline.
- You qualify on income or on a category such as first responder, educator, medical worker, civil servant, military, first-time buyer, or an underserved census tract.
Watch the trade-offs. It pairs with FHA first liens only. It requires an HUD-approved homebuyer education course. It cannot be combined with another assistance program. It is not offered in Washington. The credit floor of 620 is lower than the seconds, which helps some buyers.
One more caution. Read the paperwork. Some consumer guides note that the word “grant” is sometimes used for what is really a forgivable loan, as RealCostIQ points out. In the network’s grant, the test is simple: no note, no lien, nothing to repay.
When the Forgivable Second Is the Better Fit
The forgivable second is the better fit when you will stay, you do not meet the grant’s income or category test, and you want no second payment. It carries no interest and no monthly payment.
Say you are a repeat buyer moving up. Income is above the grant’s limit and you are not in a listed category. You expect to hold the home for five years or more. A forgivable second at 3.5% of the lesser of price or value fits. After 36 or 60 on-time first-lien payments, with no 90-day delinquency, it is forgiven.
It also pairs with more first liens: FHA, USDA, and HUD-184. That opens it to rural buyers and eligible Native American buyers. It has no income limit beyond USDA’s own on a USDA first lien, and manual underwriting is allowed.
The catch is the lien. Until forgiveness, it sits behind your first mortgage. A refinance inside the window forces a payoff or re-subordination. On a USDA refinance, existing seconds cannot be rolled into a new guaranteed loan. The credit floor is 640, with 660 on a blended score.
Pick the three-year version if your plans are shaky. Pick the five-year version only if you are confident you will stay.
When the Repayable Second Is the Better Fit
The repayable second is the better fit when cash to close is the bigger obstacle and you can carry a second payment. It is the only shape that can also cover closing costs.
At 3.5% it supports the down payment. At 5% it adds 1.5% toward closing costs and prepaid items. It is a real loan, with interest, a monthly payment, and a separate disclosure. It also has a balloon due in year 10.
Think of a buyer with steady income, decent credit, and almost no savings. The second payment fits the budget. The buyer expects to sell or refinance well before year 10. That works. A buyer who has no exit plan and tight ratios is the one this shape hurts.
Know the limits. Manual underwriting is not allowed, so you need an automated approval. The credit floor is 660, or 670 blended. It allows high-balance first liens, which the other seconds do not. USDA and HUD-184 first liens are also eligible.
Where the Cost Really Lands
Every option has a cost. It just shows up in a different place.
| Shape | Where the cost lands |
|---|---|
| Grant | Nowhere on the loan; watch the education requirement |
| Forgivable | At sale or refinance if you leave early |
| Repayable | Monthly, then at the year-10 balloon |
A deferred or “silent” second is not free. Some public programs add a recapture period or accrue interest, which raises the payoff at sale. That does not change the monthly ratio. It does change your proceeds.
Public programs vary widely. Many are run at the state level, and Urban Institute research found that most are state-based and that second mortgages make up the bulk. That is why a program you find locally may look different from the shapes above. Compare terms, not labels.
Which One Fits Your Situation?
| If this describes you | Lean toward |
|---|---|
| Income under the limit, or in a listed category | Grant |
| Want no lien and no payment | Grant |
| Staying five years or more, over the income limit | Forgivable |
| Using a USDA or HUD-184 first lien | Forgivable or repayable |
| Need closing-cost help and can carry a second payment | Repayable at 5% |
| Tight debt ratios | Grant or forgivable |
| Might move or refinance within a few years | Grant |
If your credit sits at 620 to 639, only the grant is in range. From 640, the forgivable second opens. From 660, the repayable one does.
Key Terms Defined
Grant: Assistance with nothing to repay, released at closing, with no lien, no payment, and no interest.
Forgivable second: A recorded second lien with no interest or payment that is forgiven if you keep the first mortgage current for the required period.
Repayable second: A second loan with interest, a monthly payment, and a balloon due in year 10.
Balloon: A lump sum due at the end of a loan term, after smaller payments that did not pay it off.
Combined loan-to-value: The first and second liens together, measured against the home’s value.
Lien: A legal claim on your home that must be paid or released when you sell or refinance.
What the File Needs
Lenders look for a clean file regardless of shape. Expect the application, income and asset documents, and an automated underwriting finding. The grant adds a homebuyer education certificate. The seconds add a note, a recorded security instrument, and a program agreement covering occupancy and subordination. A repayable second also gets its own loan disclosure and balloon disclosure.
Nothing stacks. You cannot combine one assistance option with another, and a mortgage credit certificate is not permitted with the seconds.
A free, independent check is worth it. Many local programs can pair with FHA loans, and HUD-approved housing counselors can help buyers sort through the options.
Frequently Asked Questions
Will down payment assistance raise my monthly payment?
Only the repayable second does. It is a loan with its own payment. The grant and the forgivable second add no scheduled payment, so your first mortgage stays the one monthly housing bill.
Is a forgivable second really free?
No. It is a recorded lien until forgiven, after 36 or 60 on-time first-lien payments. Selling, refinancing, or paying off the first mortgage early can trigger repayment of what remains.
Do I have to be a first-time buyer?
No. Repeat and move-up buyers qualify across all of these options. The three-year first-time definition is just one of the grant’s qualifying categories.
Can I use assistance on a rental or second home?
No. These options are for an owner-occupied primary residence only.
Which first mortgage do these pair with?
The grant pairs with FHA first liens. The forgivable and repayable seconds also pair with USDA and HUD-184, subject to program guidelines and full underwriting.
Balanced Verdict
No shape is best for everyone. The grant is cleanest but narrower on eligibility. The forgivable second costs nothing monthly but rewards staying. The repayable second gives the most help and asks the most of your budget.
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 is a mortgage brokerage (NMLS# 2371349) licensed for consumer mortgage lending in 16 states, arranging government-backed purchase loans and the down payment assistance options that sit on top of them through a wholesale lending network. Eligibility is determined by the lender on each file. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
Investors who want the broader program framework can review how DSCR loans work.
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References
1. HUD Handbook 4155.1 Ch.5 Sec.C
2. USDA HB-1-3555 Chapter 11 excerpt
3. RealCostIQ
4. Urban Institute on down payment assistance
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 Down Payment Assistance Changes Your Monthly Payment · Does a Forgivable Grant Count Against Your DTI on a DPA Loan? · Own-Funds Rules When a Gift and DPA Cover the Down Payment
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.