The Quick Read: Income limits cut off assistance only in certain places, and many high earners are never shut out. A buyer can face up to three separate income tests: one on the first mortgage, one on the assistance, and one on whose pay counts. Across the wholesale programs Lendmire places files with, the forgivable and repayable second liens carry no income limit of their own, and the grant has a 140% area-median-income test with several ways around it. Subject to program guidelines and full underwriting.
What an Income Limit Actually Is
An income limit is a ceiling on household earnings, set so that help goes to buyers who need it most. Most are expressed as a percentage of area median income, or AMI. That is the midpoint income for a county or metro area, published by HUD and based on a four-person household.
Two details trip people up. First, the percentage is applied to a table that changes with household size. HUD’s method sets a one-person limit at 70% of the four-person figure and adds to it as the household grows (HUD User income limits documentation). Second, the same salary can pass in a low-cost county and fail in a high-cost one. The cap follows the county, not your paycheck.
Here’s the catch most buyers miss: a limit is usually a hard cutoff, not a phase-out. Cross the line by a dollar and the whole benefit can disappear. Nobody gets half a grant for being slightly over.
Where Can an Income Test Show Up?
Think of three layers. Your file can pass one and fail another.
Layer one: the first mortgage. FHA and HUD-184 have no income ceiling. HUD describes FHA insurance as supporting first-time and low-to-moderate-income buyers, but it does not make that a condition of the loan. The lender asks whether your income supports the payment, not whether it is too high. HUD says of Section 184 loans that there is no income limit or minimum to participate, though borrowers must still qualify. USDA is different. Its guaranteed loan requires income that cannot exceed 115% of median household income, and the buyer must live in the home as a primary residence.
Layer two: the assistance itself. This is where high earners get cut off. Many public programs, run by state housing agencies and cities, cap income and price. These agencies usually restrict down payment help more than their first-loan products. Qualifying for the agency’s first mortgage does not guarantee you qualify for the assistance on top.
Layer three: whose income counts. Some tests count every adult in the home, not only the people on the loan. More on that below.
| Layer | FHA | HUD-184 | USDA |
|---|---|---|---|
| First-mortgage income cap | None | None | Yes, 115% of median |
| Counts non-borrowing adults | No cap to test | No cap to test | Yes |
| Assistance may add its own test | Depends on the option | Depends on the option | Depends on the option |
Which Assistance Shapes Carry a Limit?
The structure of the assistance decides whether an income test exists at all. Across the wholesale programs Lendmire places files with, there are four shapes. Each sits on top of a government first mortgage, and every figure below is subject to program guidelines and full underwriting.
| Shape | Typical amount | Income test | Repay? |
|---|---|---|---|
| Grant | 2% or 3.5% of price | 140% of AMI, or a qualifying category | Nothing to repay |
| Forgivable second | 3.5% of lesser of price or value | None beyond USDA’s own | Forgiven after 36 or 60 on-time payments |
| Repayable second | 3.5% or 5% | None beyond USDA’s own | Yes, loan with balloon in year 10 |
| Refinance-cost second | 1% to 3.5% of balance | None beyond USDA’s own | Yes, same terms as repayable |
The takeaway is simple. The grant is often a strong option, but it comes with an income test. The two purchase seconds and the refinance-cost second carry no income limit beyond USDA’s own limit when the first lien is USDA.
The Grant and Its Test
The grant pays 2% or 3.5% of the purchase price toward the FHA minimum investment. It is released at closing, with no lien, no payment and no interest. Nothing to repay.
It works with FHA first liens only, and it requires a credit score of at least 620 (the lowest representative score among all borrowers). An HUD-approved homebuyer education course is required. It is not offered in Washington.
The income test is household income at or below 140% of AMI. That sounds restrictive until you see the exits.
The Ways Around the Grant’s Test
A high earner can still qualify for the grant by fitting any one of these categories instead:
- A first responder, current, former or entering service: police, fire, public safety, paramedic or EMT.
- An educator.
- Medical personnel, such as a nurse, doctor, phlebotomist, or hospital or Red Cross worker.
- A civil servant at the federal, state or local level.
- Military personnel, current, retired, volunteer or unpaid.
- A first-time homebuyer, meaning no ownership interest in residential property in the three years before applying.
- A buyer purchasing in an underserved census tract.
So a household well above 140% of AMI can still be eligible. A couple earning well over the line, where one spouse teaches, may clear it on occupation alone. A repeat buyer in a qualifying census tract gets there on location.
Do You Have to Be a First-Time Buyer?
No. No option in the network requires it. Repeat and move-up buyers qualify. The three-year first-time definition is only one of the grant’s several qualifying categories.
Some public programs do use a stricter first-time rule, and the common version defines a first-time buyer as someone who has not owned a home in the previous three years. Others add exceptions, such as a single parent who owned only with a former spouse. If a program you found online says “first-time only,” that is that program’s rule, not a rule of every option.
One firm boundary applies to all of them. Assistance is for an owner-occupied primary residence only. It never covers a second home, a vacation home or a rental. Nothing stacks with another assistance program, and a mortgage credit certificate is not allowed with the second liens.
What Income Counts, Step by Step
Here is how an income test is usually built. Government-backed loan programs publish some of the most detailed income rules, so they make a useful teaching example.
1. Start with gross income. USDA counts the gross amount, before payroll deductions, of wages, overtime, commissions, fees, tips, bonuses and other compensation for all adult household members. Raises effective on or before closing are included.
2. Look forward 12 months. The lender uses current income and circumstances to estimate the coming year, unless there is verifiable evidence of a change.
3. Count the whole household. Annual income must include income from all adult household members, not just parties to the loan note. A working adult child living at home counts.
4. Subtract eligible deductions. The list is dependents, child care, elderly household, care of household members with disabilities, and medical expenses. Medical expenses apply only to elderly or disabled households.
5. Compare adjusted income to the limit. Adjusted annual income decides eligibility.
6. Verify. Lenders verify income for each adult household member for the previous two years.
Two incomes are in play, which surprises people. Annual income, used for eligibility, may differ from repayment income, which is based on the stable income of the applicants only. So a non-borrowing adult can push the household over the eligibility limit without adding a dollar of qualifying income.
Quirks That Change the Answer
- Deductions can rescue you. Dependents, child care and similar items can pull a household under a cap that gross pay would exceed. Unborn children do not count as dependents.
- Full-time students are treated gently. Only a limited slice of an adult student’s earned income counts.
- Unemployed adults. An adult who is unemployed but seeking work must have previous earnings included, unless documented evidence shows they are not seeking work.
- Different tables for different programs. HUD’s Section 8 tiers, such as 80% and 50% of AMI, are federal housing tiers. A given assistance program may use its own percentage or a dollar limit by county.
What to Do When You’re Over the Limit
Being over one limit rarely ends the search. Work through the options in order.
| Step | What to try | Trade-off |
|---|---|---|
| 1 | Check for a qualifying category on the grant | Needs proof of occupation or location |
| 2 | Switch to a forgivable second | 3.5% instead of 2% or 3.5%; credit floor 640 |
| 3 | Consider a repayable second | A real loan with a monthly payment and a balloon |
| 4 | Check a different first lien | USDA has its own cap; FHA and HUD-184 do not |
| 5 | Ask about deductions or timing | Only helps where an income test exists |
The forgivable second is often the cleanest fit for a high earner. It carries no interest and no monthly payment. It is fully forgiven after the first 36 or 60 on-time first-lien payments, as long as there is no delinquency of 90 days or more. The credit floor is 640, or 660 on a blended score. It works with FHA, HUD-184 and USDA first liens on one-to-two-unit homes.
The repayable second is the other no-income-test route. It is a loan, and it needs to be treated like one. It has interest, a monthly payment, 30-year amortization, and a balloon due in year 10. It comes with its own disclosure and a separate balloon disclosure. At 5%, it also covers closing costs and prepaid items, which is 3.5% for the minimum investment plus 1.5% toward closing costs. The credit floor is 660, or 670 blended, and manual underwriting is not allowed.
The honest trade-off: the grant costs nothing to repay but is the narrowest on eligibility. The seconds are the broadest but ask more of you, either time in the forgivable case or money in the repayable case. It’s a genuine toss-up for a buyer who fits two options. The monthly budget usually decides it.
“Just Over” Scenarios
Run the numbers on three households, using plain percentages instead of dollars.
The two-earner couple. Together they sit comfortably above 140% of AMI in their county. Neither is a public-service worker, and they are repeat buyers. The grant looks out of reach, but a forgivable second on an FHA first lien has no income test. The question becomes whether they want to commit to the on-time payment window.
The teacher over the line. One spouse is an educator and household income is above the grant’s test. The educator category applies, so the income test never comes into play for the grant. The proof of occupation becomes the paperwork.
The USDA household with an adult child. A family finds a rural home. The borrowers earn under the cap, but an adult child living at home works full time. USDA counts that income in the eligibility test, and the household may land over 115%. Deductions may help. If not, an FHA first lien with a different assistance option may be the better path.
Timing and Verification Surprises
Limit tables refresh on a schedule. HUD caps the four-person limit at the U.S. median family income except where justified by high housing costs, and limits the annual increase. A program may refresh its own table at a different time. The same household can pass one month and fail the next.
Common late-file problems tend to look alike:
- Measuring income against the wrong household size.
- Leaving out an adult who lives in the home.
- Using net pay when the program counts gross.
- Missing a raise or bonus that takes effect before closing.
- Not asking which date the program uses to test income.
A household near a limit should ask the lender early which income counts, which deductions apply, and when the program’s table was last updated. Timing a purchase around a raise, or a new adult moving in, can change the outcome. Also remember that if assistance is lost mid-file, you have to find the minimum investment elsewhere. FHA’s 3.5% minimum still applies.
The FHA Facts Underneath
Every option here sits on a government first mortgage, so the first-lien rules still matter. On FHA, the minimum required investment is 3.5% of the lesser of price or appraised value, which means 96.5% first-lien leverage. An upfront mortgage insurance premium applies to the base loan and can be financed into it. Annual mortgage insurance also applies, set by loan size and leverage.
The 2026 one-unit FHA loan limits run from $541,287 to $1,249,125, depending on the county. Your county’s limit matters as much as your income does, because the grant is not available with a high-balance first lien.
This is also where the assistance options meet your credit. A 620 floor on the grant, 640 on the forgivable second and 660 on the repayable second each sit above FHA’s own minimum. Those floors are subject to program guidelines and full underwriting.
How to Check Your Own Numbers
1. Find your county’s AMI on HUD’s income limits page, and note the household size row.
2. Add up gross income for every adult who will live in the home.
3. Compare that total to the percentage the program uses.
4. If you are near the line, ask which deductions apply and which date is tested.
5. If you are over, check whether a qualifying category fits you or whether a second-lien option makes more sense.
Lendmire’s down payment assistance programs page lays out all four shapes side by side. Tax treatment can depend on your situation; buyers should speak with a qualified tax professional before relying on any deduction or credit.
Key Terms Defined
Area median income (AMI): The midpoint household income for a county or metro area, published by HUD and based on a four-person household.
Adjusted annual income: USDA’s eligibility figure, equal to all adult household income minus eligible deductions.
Forgivable second lien: A second loan with no interest or payment that is forgiven after a set number of on-time first-lien payments.
Balloon: A lump-sum balance that comes due at a set point, here in year 10 on the repayable second.
Representative score: The credit score a lender uses to qualify a file, here the lowest among all borrowers for the grant.
Frequently Asked Questions
Do I make too much for down payment assistance?
Not necessarily. Only the grant carries an income test in this network, at 140% of AMI, and that test is waived if you fit a qualifying category. The forgivable and repayable seconds have no income limit beyond USDA’s own on a USDA first lien.
Is assistance only for low-income buyers?
No. Many public programs target lower and moderate incomes, but the options Lendmire arranges through wholesale lenders reach further. Repeat buyers qualify, and no option requires first-time status. Eligibility stays subject to program guidelines and full underwriting.
Does my spouse’s income count if they aren’t on the loan?
For eligibility, it can. USDA counts every adult household member, and many public programs do the same. Repayment income, which is what supports the payment, is based on the applicants only.
What if I get a raise before closing?
It may matter. USDA includes documented raises that take effect on or before closing and projects income forward over the next 12 months. Tell your loan officer early so the right figure is tested.
Can I use assistance on a rental or second home?
No.
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. Programs change, so check the current table before you rely on any limit.
For your own numbers, request a scenario review with Lendmire.
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. HUD User Income Limits Documentation
2. HUD Single Family Housing page
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 High Earners With Student Debt Qualify for Down Payment Assistance? · How AMI Income Caps Determine Down Payment Assistance Eligibility · How to Use Down Payment Assistance on a 2-4 Unit Home
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.