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Should You Choose a Down Payment Grant or 2nd Lien?  That is the Question.

August 2, 2019 | by Katie Claflin

Categories: Affordable Housing, First Time Buyer, Homeownership, Homes for Texas Heroes

If you’re trying to buy a home (or hope to in the near future), you should know that Texas has several home buyer programs that can help you with your down payment. 

Some programs offer the down payment assistance (DPA) as a grant (a gift that doesn't have to be repaid), while others offer it as a 2nd lien (a loan that has to be repaid). 

Both options have their benefits. DPA grants are essentially “free money” and do not have to be repaid when you sell your home.  DPA in the form of a 2nd lien often offers a lower interest rate on the mortgage loan and therefore a slightly lower monthly payment.

TSAHC actually offers both grant and 2nd lien options, giving home buyers the flexibility to choose the option that works best for them. Click here to learn more about TSAHC's home buyer programs.

With so many down payment choices, how do you know which DPA option is the right one? Below, we've provided a side-by-side comparison so you can see the difference between the two.

This chart compares our Homes for Texas Heroes Bond Grant DPA (which offers the lowest mortgage interest rate among our 4% grant products) and the HFA Preferred PLUS 2nd Lien DPA (which offers the lowest mortgage interest rate among our 4% 2nd lien products).

 

Homes for Texas Heroes Bond
(Grant)

HFA Preferred PLUS 
(2nd Lien)

Mortgage Interest Rate 4.850%* 4.375%*
Mortgage Loan Amount $200,000 $200,000
DPA Amount (4% of Loan Amount) $8,000 $8,000
Monthly Payment (Principal & Interest) $1,055 $999
Higher Monthly Payment $56  
DPA Owed At Sale or Refinance $0 $8,000

* Interest Rates current as of 8/2/2019

Click here to customize your own home loan and compare TSAHC’s DPA options using our Loan Comparison Calculator.

Ultimately the best DPA option will depend on a variety of factors, including your budget and how long you plan to stay in your home before you sell or refinance. 

A TSAHC-approved lender can help you calculate the best option for your specific financial situation.  Click here to find a lender in your area.


On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.

Comments

[email protected]

Hi David, we do not require that home buyers provide a certain level of down payment out of pocket. However, our programs do offer assistance between 3-5% of the loan amount! Some home buyers will take the money that they saved through our programs and use it towards their closing costs.

[email protected]

Hi Dennis! If you’d like more insight into the origination fees associated with our programs, we’d recommend checking out this FAQ article: https://kb.globalknowledgebase.com/39170/kb/article/102815/61-program-fees

David Robertson

Does this program require any down payment? Or does it pay all of it plus the closing costs added to the monthly payment,then after 6 months re apply for a lower rate.

Dennis

Does anybody know what the difference in fees associated with the Grant and Second Lien are?

If a forgivable second lien is offered, wouldn’t there still be origination fees for that loan, even though it is forgiven?

Is there also some sort of “origination” fee associated with the grant?

Thanks in advance.

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