Grant, Forgivable Loan, Deferred Second, or Lender Credit?

"Down payment assistance" is a label, not a contract. Two programs can both say they help with cash at closing and still leave you in opposite positions five years later. One might be a grant you do not repay. One might be a second mortgage that disappears only if you stay. One might be a second mortgage that is quiet now and due when you sell. And one common line on a Loan Estimate, a lender credit, is not assistance from a housing agency at all. It is a higher interest rate in exchange for money toward closing costs.

This guide separates those four structures using explanations published by the Consumer Financial Protection Bureau and by Bankrate, then points at a few state programs whose own pages name the structure. It does not rank programs, quote a national average, or tell you which one to take. Rules and dollar caps change. Read the note, the award letter, or the Loan Estimate for the file you are actually in.

Why the structure matters more than the headline

A poster can say "$10,000 in assistance" and still hide the only question that matters: who gets paid back, and when? If you sell in year three, a grant and a ten-year forgivable second do not behave the same way. If you refinance to a lower rate, a deferred second can come due even though you are not moving. If you take a lender credit to shrink cash at closing, you do not repay that credit as a lump sum, but you pay for it every month in the rate.

Bankrate's guide to down payment assistance sorts the common agency products into grants, forgivable loans, low-interest second loans, and deferred-payment loans. The CFPB's explanation of lender credits and points describes the fourth item on this page, which is a pricing choice on the first mortgage rather than a check from a housing agency. Keeping those sources apart stops a rate tradeoff from being advertised as "free down payment money."

Grants

A grant, in the ordinary housing sense, is money you do not repay. Bankrate describes a homebuyer grant as a one-time sum you can use for all or part of a down payment or for closing costs if you qualify.

"Generally" is doing real work in that sentence. Some awards still have strings: you may have to live in the home, stay inside an income limit, or accept a recapture if you sell or refinance inside a window. A grant can also be tied to a particular first mortgage, which means the help is not free-floating cash you can take to any lender. Ask for the award letter and read the conditions before you subtract the grant from your savings goal.

A grant is not a gift from a relative. Family gifts follow the lender's documentation rules. They are also not a lender credit. The person paying is different, and so is the cost.

Forgivable loans

A forgivable loan starts as debt. It is usually a second mortgage, recorded against the house, behind the first mortgage. Bankrate's description is the one buyers most often need: you may not have to repay it if you pay the first mortgage on time and live in the home for a set period. Bankrate says that period is often in a range of about three to ten years, that forgiveness commonly happens in steps, and that leaving early usually means paying back what has not yet been forgiven, prorated for the time you stayed.

That is a description of a common pattern, not a promise that your program works that way. Some notes forgive the full balance on one date. Some forgive a slice each year. Some forgive nothing if a payment is late, even if you are still in the house. The clock, the triggers, and the proration live in the note and the program guide. "Forgivable" on a flyer is not the schedule.

Until the conditions are met, the lien is real. It can show up when you try to refinance or sell, because the second position has to be paid, subordinated, or released. Ask the agency what a refinance does in year two, not only what happens if you stay for the whole term.

Deferred seconds

A deferred second is also a real loan secured by the home. "Deferred" answers a different question than "forgivable." Deferred means you are not asked to make payments on that loan right now. It does not mean the balance will be wiped out.

Bankrate describes deferred-payment assistance this way: you still repay it, but not until the term ends, you move out, or you refinance the first mortgage, and the assistance usually does not charge interest while you wait. Other programs name extra triggers, such as paying off the first mortgage, transferring the title, or stopping use of the house as your principal residence. Some deferred seconds do charge interest. If the page in front of you does not say "zero interest," do not assume it.

A loan can be both deferred and forgivable. Payments can wait, and the balance can also shrink if you meet an occupancy test. A loan can be deferred and not forgivable, so the full amount is waiting at sale. Read both words. Marketing often says "silent second" for the deferred kind. Silent means no monthly bill. It does not mean invisible at payoff.

Lender credits

A lender credit is the one item in this list that the CFPB defines as part of the price of the loan. In the Bureau's words, lender credits work like discount points in reverse. You pay a higher interest rate, and the lender gives you money to offset closing costs. You pay less at the closing table and more over time, because the rate is higher. The more credit you take, the higher that rate is, compared with the same lender's offer for the same kind of loan without the credit.

The CFPB says the credit can be described on a worksheet as "negative points." Its example: a $1,000 credit on a $100,000 loan is one percent of the loan, so it might be called negative one point. On the forms, lender credits are a negative number on the Lender Credits line in section J, Total Closing Costs, on page 2 of the Loan Estimate and the Closing Disclosure. The same negative amount is also part of the closing-cost figure on page 1.

That is not a grant. Nobody outside the loan is giving you the money, and you do not get the credit on top of the lowest rate. The CFPB's Loan Estimate explainer tells you to ask whether a similar loan is available at a lower rate with no credit, and how that choice changes the rate and the total cost. Our points guide is the matching math for paying points to buy the rate down instead.

Bankrate's grant overview also lists a lender credit in the family of things people confuse with grants: money applied at closing, with nothing to repay as a separate balance. Use that as a warning label. The cost is the rate, and the place to see it is section J, not a housing-agency award letter.

Where the money shows up on the forms

The Loan Estimate is a three-page form. The CFPB says the lender must give it to you within three business days of receiving an application, and that getting the form is not an approval or a denial. The Closing Disclosure is a five-page form due at least three business days before closing. Our walkthrough follows both, with the Bureau's own explainers.

A few practical differences:

• A lender credit is the negative Lender Credits line in section J. If that line is filled in, you are looking at a rate tradeoff until someone shows you the alternative.
• A seller credit is the seller's contribution. The CFPB's Closing Disclosure explainer treats it as its own item. Do not add it to a grant and call the total "assistance."
• A grant or the proceeds of a second mortgage often change cash to close. They are not the same line as a lender credit. Ask the lender to point at the exact row.
• Some subordinate assistance loans never get their own Loan Estimate or Closing Disclosure. The CFPB says you will not receive those forms for a subordinate loan through certain homebuyer assistance programs, and that you should receive Truth-in-Lending disclosures instead. Ask which forms belong to the second loan. Do not assume page 2 of the first-mortgage Loan Estimate is the whole cost of the help.

Federal rules also describe a narrow set of no-interest assistance loans, secured by a subordinate lien, that can be forgiven after an occupancy period or deferred for a long period or until sale. That is a disclosure category, not a reason to skip the note. If your help charges interest, or it expects monthly payments, it is outside that narrow pattern and should be priced like a loan.

What a few official pages actually call the help

We only summarize a program when the state housing finance agency's own page says it. The notes below are from that check on October 17, 2026. Caps move. Open the state page and the agency link before you plan around a number.

• California's MyHome Assistance Program is described as a deferred-payment junior loan for down payment and closing costs. With CalHFA conventional loans, the summary we checked said up to the lesser of 3 percent of the price or the appraised value. That is a deferred second, not a grant. See California programs.
• Tennessee's Great Choice Plus, on the page we checked, had two shapes: a deferred 0 percent forgivable second, forgiven after 10 years, and a separate amortizing second with monthly payments. One brand name, two structures. See Tennessee programs.
• Massachusetts, on the page we checked, offered a 0 percent deferred second and, separately, a 15-year amortizing second at a stated interest rate. "Deferred" and "amortizing" were both spelled out. See Massachusetts programs.
• MaineHousing's Advantage, on the page we checked, was a no-interest, no-payment junior lien repaid when you sell or pay off the first loan. That is a deferred second: no bill now, repayment later, and the summary did not call it forgivable. See Maine programs.
• Kentucky's down payment assistance, on the page we checked, was a loan repaid to the agency over 15 years. That is a repayable second, not a silent lien and not a grant. See Kentucky programs.
• Oregon's summary, on the page we checked, said help is sometimes a grant and sometimes a forgivable second lien, depending on the local program. The chip on our page shows both because the official wording names both. See Oregon programs.

If a state card on our programs hub has no chip, the agency text we verified did not name a structure. "Program details" means we are not willing to invent one.

Questions to ask before you count the money

1. Is this a grant, or is there a note and a lien?
2. If it is forgivable, on what date, in what steps, and what exactly makes me repay it (sale, refinance, a late payment, moving out)?
3. If it is deferred, what event makes the balance due, and does interest accrue while I wait?
4. If it amortizes, what is the rate, the term, and the monthly payment on top of the first mortgage?
5. Does taking the help change the first-mortgage rate or limit me to one lender?
6. If the Loan Estimate shows a lender credit, what is the rate on the same loan with that credit set to zero?
7. Which disclosures will I get for the second loan, and which line of cash to close is the assistance rather than a seller credit or a lender credit?

A HUD-participating housing counseling agency can walk through a budget and a program list with you. HUD says those agencies are nonprofits or government offices, that foreclosure counseling is always free, and that any other fee must be disclosed and waived if you cannot afford it. They are not a lender's lead form. Search HUD's counselor finder or call 800-569-4287. For a wider index of local programs, ReadyOwn's locator describes itself as a free, ad-free search from the Homeownership Council of America. Treat any dollar figure there as unverified until the agency page says it.

Practical takeaways

• A grant is generally not repaid. Read the conditions anyway.
• A forgivable loan is debt until the written conditions are finished. Bankrate's typical window is a stay of several years, with a prorated payback if you leave sooner.
• A deferred second skips payments for now and is still owed later, unless the documents also forgive it.
• A lender credit, per the CFPB, is a higher rate in exchange for money toward closing costs, shown as a negative number in section J.
• Our state chips repeat only the structure the agency named. The longer check is the note, not the nickname.

Sources

• Bankrate: Down payment assistance programs
• Bankrate: First-time homebuyer grants
• CFPB: How should I use lender credits and points?
• CFPB: Loan Estimate explainer
• CFPB: What is a Loan Estimate?
• CFPB: What is a Closing Disclosure?
• HUD: About housing counseling
• HUD: Find a counselor

State examples repeat only what the agency page said at our October 17, 2026 check. The CFPB's $1,000-on-$100,000 figure is the Bureau's own illustration of one point, not a quote. This article is for education only and is not financial, legal, or tax advice.