The Quick Read: The assistance options Lendmire arranges sit on FHA, USDA and HUD-184 first mortgages, so a conventional first loan is not part of those programs, and the choice of first loan is made before you write an offer. For most buyers the real decision is which of those government-backed first loans to build the assistance on.
Key Takeaways
- Assistance comes in four shapes: a grant, a forgivable second lien, a repayable second lien, and a second lien for refinance costs.
- You do not need to be a first-time buyer. Repeat and move-up buyers qualify.
- The home must be your owner-occupied primary residence. A second home or rental does not qualify.
- The grant option is paired with an FHA first lien. It is 2% or 3.5% of the purchase price, with nothing to repay.
- Assistance covers cash to close. It does not make mortgage insurance disappear.
What Is Down Payment Assistance, Really?
Down payment assistance is money from an approved source that covers some or all of your down payment, and sometimes closing costs. It arrives in one of four shapes. Each behaves differently after closing, so the shape matters as much as the amount.
Assistance is always a percentage of the price or value, not a fixed check. Across the wholesale lenders Lendmire works with, the structures look like this. These are program-level guidelines, subject to full underwriting and not a commitment to lend. Lendmire’s down payment assistance programs page lays out the full menu.
| Shape | Size | Repayment | 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 | 30-year amortization, balloon in year 10 | 660 |
| Refinance-cost second | 1% to 3.5% of balance | Same terms as repayable second | 660 |
A few details change who fits where. The grant is released at closing with no lien, no payment and no interest. It requires a homebuyer education course and is not offered in Washington. It also carries an income test: household income at or below 140% of area median income. Buyers skip that test if they are a first responder, educator, medical worker, civil servant, military member, first-time buyer, or buying in an underserved census tract.
The forgivable second charges no interest and asks for no monthly payment. Miss a payment on the first loan by 90 days or more and the forgiveness clock is in trouble.
The repayable second is a real loan. It has interest, a monthly payment and its own disclosures. At 5%, the extra 1.5% covers closing costs and prepaid items. Treat it like any other debt, because it is one.
The second-lien options carry no income limit beyond USDA’s own limits on a USDA first loan. The refinance-cost second only works on an FHA refinance, up to 104% combined leverage.
One more point. No option can stack with another assistance program, and a mortgage credit certificate cannot ride with the seconds.
Can the First Mortgage Be Conventional?
Yes, in the sense that the conventional world has its own assistance framework. The shapes in the table above are paired with government first liens. Two different pairings exist, and mixing them up is the most common planning mistake.
The government-backed path. The grant pairs with FHA first liens only. The forgivable and repayable seconds also pair with USDA and HUD-184 loans. That is the path Lendmire arranges through wholesale lenders.
Fannie Mae does not buy that second lien. It only sets the rules for pairing it with a first loan it does buy.
The conventional path has four main rules:
- The second must come from an eligible provider, not the home seller or another interested party.
- The first mortgage must be fixed-rate, or an adjustable loan with a long enough fixed stretch.
- Combined leverage can reach 105% of value.
- The home must be a one- to four-unit principal residence.
Typical providers include state and local agencies, nonprofits, and employer housing programs. If the provider and the first loan both set income limits, the stricter limit applies.
How the File Is Built, Step by Step
The order matters. Reverse it and you can lose the assistance after you have a signed contract.
1. Pick the first loan and the assistance together. The first loan sets your credit floor, mortgage insurance and limits. The assistance sets its own floor and rules on top. Both must pass.
2. Confirm the program is open. Funds can pause or run out. Confirm availability before you rely on it in an offer. Also confirm the lender works with that program.
3. Run the first-lien approval. With FHA underneath, the minimum investment is 3.5% of the lesser of price or appraised value. The first lien is financed at 96.5%. Automated underwriting issues a finding, and the assistance options follow it.
4. Finish the education step if the grant is your shape. An HUD-approved homebuyer course is required. You pay up front, and the cost is credited back at closing. The forgivable and repayable seconds carry no counseling requirement. An HUD-approved housing counselor can still give independent advice on whether the terms fit you.
5. Document the source and terms. A grant creates no lien and is documented as a grant. A second lien needs a note, lien terms and proof the provider is eligible.
6. Close both liens together. The first and second close at the same table, with disclosures for each loan.
Underwriting treatment differs by structure, and this is where the money shows up. A deferred second lien with a repayment structure of five years or more is judged on the first lien’s leverage, not the combined figure. The second’s monthly payment also stays out of the debt-to-income ratio. An amortizing second does the opposite: it adds a monthly payment that counts against you. The second-lien options in the Lendmire network follow the automated underwriting finding, so a repayable second is underwritten as the real debt it is.
Where the General Rule Breaks
Rules like these have edges. These are the ones that catch buyers.
Rentals and second homes. Assistance is for an owner-occupied primary residence only. A second home, vacation home or rental does not qualify. That is the whole answer, and it holds on every path.
Two- to four-unit homes. The conventional path asks more of you here. Fannie Mae’s section on Community Seconds requires 5% from your own funds on a two- to four-unit principal residence above 80% leverage. A one-unit home above 80% leverage needs no minimum contribution from your own funds. The forgivable and repayable seconds in Lendmire’s network cover one to two units. The grant covers one to four. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.
Condos and townhomes. The property type changes the paperwork. A condo needs an approved project on the government path.
Stacking sources. On the conventional path, more than one Community Seconds loan is allowed up to the 105% combined cap. On the government path, no option stacks with another assistance program. Know which rulebook you are in before you chase a second source.
Home equity lines. A line of credit does not qualify as an assistance second at the highest combined-leverage tier. The tier needs a true second from an eligible provider.
Employer grants. Employers can provide grants for a down payment or closing costs on a principal residence. Confirm with the lender how your employer’s program is documented.
The USDA overlap. One spot where USDA and conventional meet: Fannie Mae treats a subordinate lien under USDA’s Section 502 Leveraged program as eligible for Community Seconds. Do not stretch that to other USDA structures without checking the program rules.
Seller-funded help. Conventional guidelines generally bar seller or interested-party funding of a borrower’s down payment assistance. A “grant” that the seller quietly reimburses is the problem these rules were written to stop.
Does Assistance Change Mortgage Insurance?
No. Assistance changes how you fund the purchase, not whether insurance applies. On the FHA path, an upfront premium of 1.75% of the base loan is charged and can be financed into the loan. An annual premium is also charged, set by loan size, term and leverage. On the conventional path, insurance depends on the loan’s leverage, and the assistance second does not erase it. The CFPB notes that agency-backed conventional loans can require as little as 3% down. Assistance can be the source of that 3%.
Loan size also matters on the FHA side. The 2026 one-unit FHA limits run from $541,287 to $1,249,125 by county. The grant needs a first lien that is not high-balance. The repayable second can sit on a high-balance first lien. Whether either is the right fit depends on your county.
What the Decision Looks Like in Practice
Picture four buyers.
A renter with thin savings and a steady job. Neither a grant nor a second necessarily wins. If household income is at or below 140% of area median income, or a category applies, the grant leaves no debt behind. If income is above that and no category fits, a forgivable second is the next look, assuming a 640 score.
A repeat buyer moving up. Nothing in the network requires a first-time buyer. A move-up buyer can use the second-lien options. The grant also works if income or category conditions fit.
A public-service worker. A teacher, nurse, firefighter or soldier skips the income test on the grant. That is often the cleanest route when a 620 score is the main hurdle.
A buyer with a solid credit score and a high-balance loan. A 660 score opens the repayable second, which allows a high-balance first lien. The tradeoff is a real loan, a monthly payment and a balloon in year 10.
A quick way to compare the paths:
| Question | Government-backed path | Conventional path |
|---|---|---|
| Who provides the help? | Wholesale programs Lendmire arranges | State agencies, nonprofits, employers |
| Combined leverage | Set by the option | Up to 105% |
| Multi-unit rule | One to two units (seconds), one to four (grant) | 5% own funds above 80% leverage |
Think about the exit too. A second lien comes due or forgives under its terms when you sell, refinance, move out or pay off. A repayable second means a plan for that balloon in year 10. A forgivable one means making 36 or 60 on-time payments. Many public programs also add recapture periods of their own, which is a good reason to read the note before you sign.
Key Terms Defined
Combined loan-to-value (CLTV): The total of all liens on the home divided by its value, including the first mortgage and any assistance second.
Forgivable second lien: A second loan with no interest or payment that is wiped out if you make the required on-time payments on the first mortgage.
Balloon payment: A lump sum due on a set date, even though the monthly payments did not pay off the loan.
Minimum required investment: The share of the price that must come from you or an eligible source. On FHA it is 3.5%.
Community Seconds: Fannie Mae’s name for a second lien from an approved source paired with a first mortgage.
Frequently Asked Questions
Do I have to be a first-time buyer to use down payment assistance?
No. No option in Lendmire’s network requires it. Repeat and move-up buyers qualify. The first-time definition (no ownership interest in a home for the prior three years) is only one of several categories that exempt a buyer from the grant’s income test.
Can I use assistance on a rental or second home?
No. Assistance is for an owner-occupied primary residence only. That holds for every option and for conventional pairing too.
Is the second lien actually a loan?
The forgivable and repayable seconds are loans, and they get their own disclosures. The forgivable one carries no interest or payment and is forgiven after 36 or 60 on-time first-lien payments. The repayable one has interest, a monthly payment and a balloon in year 10. The grant is the only shape with nothing to repay.
Does assistance remove mortgage insurance?
No. Assistance covers cash to close. On an FHA loan, the upfront premium is 1.75% of the base loan and can be financed. The annual premium still applies. The first loan sets the insurance, not the assistance.
What if I want a conventional loan specifically?
The assistance options described here are paired with an FHA first lien, so a conventional first mortgage is not part of this program. A broker can compare the FHA path against USDA or HUD-184 first-lien options, depending on the property and the borrower. All of these are subject to program guidelines and full underwriting.
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. Reach the team at 828-256-2183. Program availability varies by state and borrower, and none of this is 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 with consumer lending licenses in 16 states. Down payment assistance options are arranged alongside FHA, USDA and HUD-184 first liens through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide B5-5.1-02: Community Seconds Loan Eligibility
2. CFPB: Figure out how much you want to spend
This article is part of Lendmire’s down payment assistance program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Stack Down Payment Assistance as a Teacher or First Responder · Is Down Payment Assistance Worth It for a First-Time Buyer? · How Down Payment Assistance Changes Your Monthly Payment
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
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.