Down Payment Assistance: Grant vs. Deferred Loan vs. Forgivable Loan

"Down payment assistance" sounds simple, but it comes in different forms, and the form matters more than most buyers realize. Some help you never repay. Some you repay later. Some you repay with a monthly payment. Here's how the common types differ.

1. Grants Generally, a grant is money you don't have to repay. Programs often come with conditions, such as how long you must live in the home, so read the fine print.
2. Forgivable loans You receive the money as a loan, but it's forgiven over time if you meet the program's terms, usually by staying in the home as your primary residence for a set number of years. If you sell or move early, you may owe some or all of it back.
3. Deferred second mortgages This is a second loan placed behind your main mortgage. "Deferred" means you don't make monthly payments, and the interest rate may be 0%. But it isn't free: it typically comes due when you sell, refinance, or stop living in the home. Florida Housing's second-mortgage assistance, for example, is structured this way.
4. Repayable second mortgages Another second loan, but with a monthly payment, which adds to your total housing cost.

Why the type matters

• Selling or refinancing later: a deferred loan has to be paid off when you do, which affects your equity and your plans.
• Monthly budget: a repayable second adds a payment, while a grant or deferred loan doesn't.
• Staying power: forgivable loans reward you for staying put, and penalize you for leaving early.

Questions to ask a lender

• Is this a grant, a forgivable loan, or a loan I'll repay? If repaid, when?
• Is there interest? Is there a monthly payment?
• What happens if I sell or refinance?
• Is there a required time I must live in the home?
• Are there income, occupation or first-time-buyer requirements?
• What are the fees and the first mortgage terms with this program?

Program rules vary and change often. I'm a realtor, not a mortgage lender, so I can't tell you what you'd qualify for or run your numbers. A lender can, and I'm happy to connect you with a trusted one, no pressure and no obligation.

Wondering if down payment help could get you into a home? Reach out and I'll connect you with the right person.