Blog
Blog
Should You Choose a Down Payment Grant or 2nd Lien? That is the Question.
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 repayable 2nd lien (a loan that has to be repaid) or deferred forgivable 2nd lien (a loan that is forgiven as long as you stay in the home a certain period of time).
All options have their benefits. DPA grants are essentially “free money” and do not have to be repaid, no matter how long you stay in your home. DPA in the form of a repayable or forgivable 2nd lien often offers a lower interest rate on the mortgage loan and therefore a slightly lower monthly payment.
TSAHC offers its DPA as either a grant or deferred forgivable second lien, giving home buyers the flexibility to choose the option that works best for them.
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 of two of our most popular options.
FHA Loan | Conventional(80% AMFI) | |
|---|---|---|
| Mortgage Interest Rate | 7.625%* | 7.250%* |
| Total Loan Amount | $294,566** | $291,000 |
| DPA Amount (3% of Loan Amount) | $8,837 | $8,730 |
| Monthly Payment (Principal & Interest) | $2,218 | $2,150 |
| Higher Monthly Payment | $68 |
* Interest Rates current as of 8/9/2024
** Total loan amount includes the 1.75% FHA upfront mortgage insurance premium
You can further compare TSAHC’s DPA options by using our Program 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.
More about TSAHC’s Home Buyer Programs
Are you ready to purchase a home? TSAHC can help. Our Homes for Texas Heroes and Home Sweet Texas Loan programs provide Texas families with up to 5% down payment assistance in the form or a grant or 2nd lien that can be put towards your down payment and closing costs. TSAHC also offers a Mortgage Credit Certificate Program for first time home buyers that provides a tax credit that can save you thousands of dollars over the life of your home loan.
Take our Eligibility Quiz to see if you qualify for one or both assistance options. You can also compare assistance options by using our Program Comparison Calculator.
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.
Subscribe to Our Newsletter
Sign up to have TSAHC news & updates delivered to your inbox.