The Quick Read: Yes, usually, when you buy a finished home from a builder with an owner-occupied FHA, USDA or HUD-184 first mortgage. Two things decide it. The home must pass the first mortgage’s new-construction paperwork, and the assistance must come from a program, not from the builder. Builders can help with closing costs, but not with your down payment.
Why the Answer Is “Yes, With Conditions”
New construction does not disqualify you from assistance. The rules that trip buyers up are narrower than that.
In the programs Lendmire arranges through wholesale lenders, assistance attaches to a government-backed first mortgage. That first mortgage can finance a brand-new home as readily as a resale. The assistance sits on top of it.
Three conditions matter on a new build:
- The home gets finished and documented. The first-mortgage program needs its builder paperwork, warranty and completion proof.
- The assistance has its own property rules. Each option has a list of eligible first mortgages and property types.
- The money source is clean. Assistance from a program is fine. Assistance from the builder is not.
Nobody has to be a first-time buyer to use these options, either. Repeat buyers and move-up buyers qualify. And the home must be your primary residence. Assistance does not apply to second homes or rentals.
What Counts as “New Construction”?
A new home is generally one that is complete and has never been lived in, or one still being built. USDA’s training material defines a new dwelling as less than one year old and never occupied. FHA draws a similar line, and it treats a house that has already been occupied as an existing home.
That matters because the paperwork changes. A resale needs an appraisal and an inspection of your choosing. A new build also needs proof the builder followed the plans and the home is complete.
Which Assistance Shapes Fit a New Build?
All three purchase options can work on a new build. They differ in what they ask of you and what they cost later. A fourth shape exists only for FHA refinances, so it does not apply here.
| Option | What you get | Credit floor | Pairs with |
|---|---|---|---|
| Grant | 2% or 3.5% of price, nothing to repay | 620 | FHA first liens |
| Forgivable second | 3.5% of lesser of price or value | 640 | FHA, HUD-184, USDA |
| Repayable second | 3.5% or 5% of lesser of price or value | 660 | FHA, HUD-184, USDA |
Credit floors are the lowest representative score among borrowers. The second-lien options allow a blended score when a lower-scoring co-borrower is on the loan, with minimums of 660 for the forgivable second and 670 for the repayable one. Everything here is subject to program guidelines and full underwriting.
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 carries an income test. Your household income must be at or below 140% of the area median income, unless you fall in a qualifying category. Those categories include first responders, educators, medical workers, civil servants, military personnel, first-time buyers, and buyers in an underserved census tract. An HUD-approved homebuyer education course is required. The grant is not offered in Washington.
The grant also works only with certain FHA first liens. It cannot combine with FHA One-Time Close, which is the construction-to-permanent route. More on that below.
The forgivable second
This is a second loan for 3.5% of the lesser of the price or the appraised value. It has no interest and no monthly payment. It is fully forgiven after 36 or 60 on-time payments on your first mortgage, depending on the version. A 90-day-or-longer delinquency breaks that.
There is no income limit beyond USDA’s own on a USDA first lien. Manual underwriting is allowed.
The repayable second
This is a real loan. It covers 3.5% or 5% of the lesser of the price or the appraised value. At 5%, the extra 1.5% goes toward closing costs and prepaid items. It carries interest, a monthly payment, and a 30-year amortization with a balloon due in year 10. It comes with its own disclosures.
Think of it this way: it gets you into the home with less cash, and you pay for that over time. Buyers who plan to stay a decade or more should plan for the balloon from day one. Manual underwriting is not allowed on this option, but high-balance FHA first liens are.
Notice the phrase “lesser of price or appraised value” on both second liens. On a new build, that wording matters, and it comes back below.
Can the Builder Pay for My Down Payment?
No. On FHA, the minimum investment cannot come from the builder. HUD’s FHA guidance says interested-party contributions may not be used for the minimum required investment. A builder is an interested party. So is anyone with a stake in the sale going through.
That is the rule that most often catches new-build buyers. The builder’s sales office may call something “down payment help.” Look closely at where the money originates.
The line looks like this:
- Builder credits toward closing costs: allowed within limits.
- Assistance from a program: allowed, if that option’s rules are met.
- Builder money counted as your down payment: not allowed on FHA.
The same HUD guidance sets a ceiling. Seller-side contributions above 6% of the price, or above your actual costs, count as an inducement to purchase. The price is reduced dollar for dollar before the loan amount is figured. A bigger builder credit can therefore shrink your loan instead of helping it.
USDA has its own cap on seller contributions as well. Whichever first mortgage you choose, add up every builder credit before you sign.
What the First Mortgage Wants on a New Build
The first lien is where most of the extra paperwork lives. Assistance does not change it.
On FHA, the lender collects a builder’s certification of plans, specifications and site. It also collects a warranty of completion. HUD publishes the Warranty of Completion of Construction, form HUD-92544, and copies go to both you and the builder at closing. Expect a certificate of occupancy or equivalent completion proof as well.
A common worry is the old ten-year warranty. That requirement is gone. A HUD mortgagee letter eliminated the ten-year protection plan on new construction. The one-year builder warranty stays. HUD says its inspection requirements plus that warranty do the job better.
USDA also asks for a builder warranty and completion proof on a builder-sold home. A homeowner who builds their own home cannot warrant it themselves.
HUD-184 loans can finance new construction too. Section 184 itself does not provide assistance. The program does not lend directly or provide down payment help. Any assistance comes from a separate provider. The forgivable and repayable seconds are built to pair with HUD-184 first liens.
Under all of it sit the FHA basics. The minimum investment is 3.5%, which means a first lien at 96.5% of value. An upfront mortgage insurance premium applies to the base loan and can be financed. Annual mortgage insurance is also charged, and it varies by loan size and leverage. FHA loan limits for one-unit homes vary by county.
Buying From a Builder vs. Building on Your Own Lot
Buying a finished home from a builder is the clean path for assistance. Building on land you own is a different animal.
| Scenario | How financing works | Assistance fit |
|---|---|---|
| Finished or spec home from builder | Standard purchase first lien | Generally fits |
| Home under construction, builder-sold | Purchase first lien at completion | Fits if documents clear |
| Your lot, construction-to-permanent loan | One loan covers build and permanent | Generally outside these options |
The grant specifically excludes FHA One-Time Close. The forgivable and repayable seconds list standard first liens, not construction-to-permanent products. If you are building on your own lot, assume these options do not apply until a lender confirms otherwise.
Single-close loans exist at USDA and Section 184 too. But whether a second lien can sit behind one depends on the assistance provider. Ask before you assume.
How the Process Runs, Step by Step
The order of events matters more on a new build than on a resale. Here is the sequence.
1. Pick the first mortgage. FHA, USDA or HUD-184 depending on your situation and the home’s location.
2. Match an assistance shape. Your credit, income and plans for the home point to one of the three.
3. Check the builder’s lender rules. Some builders push their own lender. Find out whether that lender can handle the assistance option you want.
4. Write the contract carefully. Builder credits for closing costs go in the sales contract and count against the 6% ceiling.
5. Appraisal. For a home not yet complete, the appraiser works from plans and specifications along with the builder’s certification.
6. Construction documents. The lender collects the permit, completion proof, warranty and any required inspection reports.
7. Underwriting. The lender applies the first-mortgage rules to the combined financing and confirms how the second lien is treated.
8. Closing. You receive the warranty copy, and the assistance is released or the second lien is recorded.
The grant adds a homebuyer education course, and you pay for it up front. The cost is credited back at closing. The repayable second needs an automated underwriting approval and a separate loan disclosure with its balloon terms. The forgivable second allows manual underwriting, though a blended score on either second lien requires an automated approval.
If the build slips, your loan paperwork may need updates. Ask the lender what happens to the file if the completion date moves.
Where New-Build Buyers Get Burned
Four traps come up repeatedly on new builds.
The upgrades push the price up while value stays put. Both second liens are a percentage of the lesser of price or appraised value. Pay for a long list of upgrades and the appraisal may land below the contract price. The assistance is then figured on the lower number. The grant works from price, but a gap between price and value still hits your loan amount and cash needs.
The builder’s lender cannot do your option. A builder-preferred lender may not offer the assistance shape you need. Builder incentives tied to using that lender are a trade. The CFPB’s home loan toolkit advises comparing Loan Estimates for the same loan amount and type, so you see what a credit really costs.
Credits hide a higher price. A credit that looks generous can be offset by a higher base price. Compare the final price after incentives, not the headline credit.
The home is not really “new.” An occupied home under a year old is treated as existing on FHA. That can change which documents apply.
One more point on stacking. Assistance cannot be combined with another assistance program. Builder credits for closing costs are a different thing, and they sit inside the 6% ceiling.
A Buyer Scenario, in Percentages
Picture a repeat buyer moving up. She is buying a finished home from a builder with an FHA first mortgage. Her credit sits above the repayable second’s floor. Her household income is above 140% of the area median, and she is not in a qualifying category. That rules out the grant.
She picks the repayable second at 5% of the lesser of price or value. That covers her 3.5% minimum investment plus 1.5% toward closing costs and prepaid items. The builder offers a closing-cost credit, which she keeps well under the 6% ceiling.
Then the appraisal comes in below the contract price. Her assistance is now 5% of the lower figure. She either covers the gap or renegotiates with the builder.
She also has a monthly payment on the second and a balloon in year 10. She plans around both. The assistance got her into the home. It did not make the loan disappear.
A different buyer, say a nurse with strong credit and a household income at or below 140% of the area median, would look first at the grant. The grant is a percentage of the purchase price that does not have to be repaid, whereas the forgivable second is only forgiven after a set number of on-time first-lien payments and the repayable second carries a monthly payment and a balloon.
Questions to Ask Before You Sign
Put these to the builder and the lender before you sign a purchase contract:
- Which lenders does the builder work with, and can any of them place assistance on an FHA, USDA or HUD-184 loan?
- Is the home finished, under construction, or only proposed?
- What credits does the builder offer, and are they counted against the 6% ceiling?
- What happens to my loan paperwork if the completion date moves?
- How will the appraiser value the home, and what if the value lands below the price?
- Will my assistance option be figured on price or on value?
Counseling can help too. HUD-approved agencies offer pre-purchase counseling, and the CFPB maintains a lookup tool for housing counselors.
Key Terms Defined
Minimum required investment (MRI): the cash an FHA buyer must put into the purchase, 3.5% of the lesser of price or appraised value.
Interested party: anyone with a stake in the sale going through, such as a builder, developer or seller.
Second lien: a loan recorded behind your main mortgage. The forgivable and repayable options are second liens.
Forgivable: a second lien that is wiped out if you make the required on-time payments on your first mortgage.
Balloon: a lump-sum payoff due at a set point. The repayable second’s balloon comes due in year 10.
Certificate of occupancy: a local sign-off that a finished home is safe to live in.
Appraised value: a licensed appraiser’s opinion of what the home is worth, which can differ from the contract price.
Where to Start
Start with the home’s status and the builder’s lender. Those two answers narrow the field.
If you are buying a primary home and want to see whether one of the down payment assistance programs 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 broker, so lenders make the final decision after full underwriting. This is not a commitment to lend.
Frequently Asked Questions
Can down payment assistance cover my earnest money deposit on a new build?
Not directly. The grant is released at closing, and the second liens fund at closing as well. Your deposit generally comes from your own funds when you sign the contract. A lender can tell you how the deposit is credited toward your required investment, so ask before you commit.
Does assistance work if the builder requires me to use their lender?
Only if that lender can place the assistance option you want. Many builder-preferred lenders do not offer these structures. You can usually use an outside lender, but you may give up a builder incentive tied to the preferred one. Weigh the incentive against what the assistance is worth to you.
What if the home is not finished when I sign the contract?
You can still buy it, but the loan closes on a completed home. The lender needs completion proof, the builder’s certification and the warranty paperwork. Assistance is released or recorded at closing. Ask how a delay affects your file before you sign.
Can I use assistance on a condo or townhome that is brand new?
Often, yes. The grant allows FHA-approved condominiums and PUDs. The second-lien options allow single-family detached or attached homes, condominiums and PUDs. The project still has to meet the first mortgage’s rules, and unique property types are excluded.
Can I use these options if I am building on land I already own?
Generally not. The grant excludes FHA One-Time Close, and the second liens pair with standard purchase first liens, not construction-to-permanent loans. If you are building on your own lot, ask a lender whether any structure fits. Do not assume it will.
Investors who want the broader program framework can review how DSCR loans work.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, USDA and HUD-184 home purchase financing with grant-style, forgivable and repayable down payment assistance options in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. USDA Rural Development new construction training module
2. HUD FHA Q&A: interested-party contributions
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 You Use Down Payment Assistance on a Duplex? · How Down Payment Assistance Changes Your Monthly Payment · Can You Get Down Payment Assistance After Owning a Home Before?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Important disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage brokerage. Lendmire is not a direct lender, depository institution, or financial advisor. All loan inquiries are subject to lender underwriting; this article does not constitute a commitment to lend. Rates, terms, and program guidelines are subject to change without notice and vary by borrower profile, property type, and state. Information in this article is general in nature and is not financial, legal, or tax advice. Equal Housing Opportunity. NMLS Consumer Access: nmlsconsumeraccess.org.