Down Payment Assistance Glossary
Published Last updated
Assistance program documents use a vocabulary that appears nowhere else in a mortgage file. These are the terms that decide what you owe, when you owe it and whether you qualify at all — defined the way agencies use them.
Quick answer: What do assistance program terms mean?
Terms like soft second, recapture, subordinate financing, AMI and forgiveness period decide what an award actually costs you. A soft second has no monthly payment; recapture is a federal tax rule on some bond-funded loans; AMI is the area median income the caps are built from. This glossary defines each in plain language.
TL;DR
- Soft second: no monthly payment, due on sale or refinance.
- AMI: the area median income your income cap is derived from.
- Recapture: a federal tax that can apply to bond-funded loans sold early.
Quick questions
- What is subordinate financing?
- Any lien recorded behind your first mortgage — which is what most assistance seconds are.
Published Last updated
- Reviewed September 2026
Why the wording matters
Two programs can offer the same dollar amount and cost you completely different sums, and the difference is almost always buried in three words: whether the award is forgivable, deferred or repayable, and what the administrator's subordination policy says.
The definitions below describe how each term is used in program guidelines. Individual programs override general usage, so the controlling document is always the note and award letter you sign at closing.
Terms A–Z, by topic
Structures
- Deferred second mortgage
- A subordinate loan with no monthly payment and no forgiveness. The balance is due when you sell, refinance, transfer title or pay off the first mortgage.
- Down payment assistance (DPA)
- Funds from a public agency, nonprofit, employer or lender that cover part of a buyer's down payment and, on most programs, closing costs.
- Forgivable second mortgage
- A zero-percent subordinate lien with no monthly payment that is written off over a required occupancy period, either gradually each year or all at once on a set anniversary.
- Individual Development Account (IDA)
- A matched savings account run by a nonprofit in which your deposits toward a home purchase are matched, with the match released at closing.
- Mortgage Credit Certificate (MCC)
- A federal income tax credit for a percentage of annual mortgage interest, issued by a housing agency at purchase and lasting the life of the loan. It reduces ongoing cost, not cash to close.
- Repayable second mortgage
- A subordinate loan that amortizes with a monthly payment alongside the first mortgage, counted in your debt-to-income ratio.
- Silent second
- Common name for a subordinate lien with no monthly payment — either deferred or forgivable. Silent refers to the absence of a payment, not to the lien being hidden; it is recorded publicly.
- Soft second
- A subordinate loan with below-market or accruing interest and little or no monthly payment, sitting between a deferred and a repayable second.
Eligibility
- Acquisition cost limit
- The maximum price a home can cost and still qualify for a program, published by county and sometimes higher for new construction or targeted areas. Distinct from the loan limit.
- Area median income (AMI)
- The midpoint household income for a metro area or county, published annually by HUD. Program income caps are usually expressed as a percentage of AMI, such as 80% or 140%.
- First-time homebuyer
- Defined by most programs as having had no ownership interest in a primary residence for the previous three years. Veterans and buyers in targeted areas are often exempt from the requirement.
- Non-occupant co-borrower
- Someone who signs the loan but does not live in the home. Permitted by some assistance programs and prohibited by others; where permitted, their income usually still counts toward the cap.
- Targeted area
- A federally designated census tract where programs relax rules — commonly waiving the first-time buyer requirement and raising income and price limits.
Underwriting
- CLTV (combined loan-to-value)
- The first mortgage plus every subordinate lien, divided by the home's value. Assistance recorded as a second mortgage raises CLTV; a grant does not.
- Lien position
- The order in which liens are repaid from a sale. Assistance almost always records in second position behind the first mortgage; some programs require third position when another award is present.
- Minimum required investment (MRI)
- FHA's rule that 3.5% of the purchase price comes from an acceptable source. Some assistance can satisfy it and some cannot, which is a defining difference between programs.
Process
- Homebuyer education certificate
- Proof of completing an approved homebuyer course, required by nearly every program for at least one occupying borrower and treated as a closing condition.
- Participating lender
- A lender approved by the program administrator to originate its loans and reserve its funds. Assistance cannot be delivered through a non-participating lender.
- Reservation
- The step where a participating lender locks your allocation of a program's finite funds, usually once you are under contract. Until funds are reserved, eligibility does not guarantee money.
Repayment
- Clawback
- A provision requiring repayment of a grant if a condition is broken early, most commonly paying off or refinancing the first mortgage within the first few months after closing.
- Recapture tax
- A federal tax that can apply when a home bought with a bond-funded program is sold at a gain within nine years while the owner's income has risen substantially. Many agencies reimburse it. Consult a tax professional.
- Subordination
- An agency's written agreement to keep its lien in second position when you refinance the first mortgage. Without it, the assistance must be paid off to refinance.
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October 2026 Down Payment Assistance Terminology Review
We reviewed agency program guideline terminology, HUD income and targeted-area definitions and second-lien repayment and subordination language relevant to this page. No material changes requiring substantive revisions were identified this month. The information and sources shown here remain current as of our latest review.
- Checked: agency program guideline terminology
- Checked: HUD income and targeted-area definitions
- Checked: second-lien repayment and subordination language
This page's scheduled monthly review is overdue. The section above reflects our latest completed review, not a new one for the current month.
Current data & page updates
- Page last reviewed
- September 27, 2026
- Page last substantively updated
- September 27, 2026
- Next scheduled review
- October 27, 2026
- Current monthly review
- October 2026
- Live data feed
- No
This page is past its scheduled review date and is queued for the next review cycle.
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Broker identification. Simply Approved Mortgages LLC is a mortgage broker and is not a direct lender. We arrange residential mortgage loans with third-party lenders and do not make the lender's final credit decision or fund the loan. We arrange residential mortgage loans in Florida and Colorado.
Down payment assistance programs. Down payment and closing-cost assistance programs listed or referenced on this site may be administered by third parties, including state housing finance agencies, cities, counties, Federal Home Loan Banks, nonprofit organizations, lenders, and other program sponsors. Simply Approved Mortgages LLC does not administer, control, fund, or guarantee third-party assistance unless expressly stated otherwise.
Listing or displaying a program does not constitute an offer of that program, a representation that funding is currently available, or a determination that a borrower or property qualifies. Program availability, funding, assistance amounts, income limits, purchase-price limits, credit requirements, occupancy requirements, geographic restrictions, homebuyer education requirements, participating-lender requirements, repayment terms, and other eligibility criteria vary by program and may change or become unavailable without notice. Eligibility and current program terms must be confirmed for the particular transaction.
Types of assistance. Down payment or closing-cost assistance may be structured as a grant, forgivable loan, deferred-payment loan, repayable second mortgage or other form of assistance. Assistance structured as a lien or secondary financing may be subject to repayment, forgiveness, occupancy, resale, refinance, or other conditions. Assistance should not be considered "free money" unless the applicable program documents expressly provide that the assistance is a grant with no repayment obligation.
Receiving or potentially qualifying for down payment assistance does not guarantee mortgage approval, guarantee receipt of assistance, or necessarily eliminate all funds that a borrower may be required to contribute to a transaction.
Credit and program terms. All loans are subject to lender credit approval, underwriting, acceptable appraisal, title review, insurance, and supporting documentation. Eligibility, programs, rates, APRs, points, fees, payments, terms, loan amounts, down-payment requirements, and availability may vary based on borrower, property, occupancy, credit profile, loan-to-value ratio, debt-to-income ratio, lender, assistance program, and location and may change without notice. Not all borrowers, properties, products, or programs will qualify or be available in every location. Nothing on this site constitutes a loan approval, rate lock, offer, commitment to lend, guarantee of assistance, or guarantee of closing.
Rates, payments and calculators. Rates, APRs, payments, down payments, estimated assistance amounts, affordability, home prices, closing costs, savings, and other calculator or scenario results displayed on this site are estimates or illustrations unless expressly stated otherwise. Actual eligibility, assistance, and loan terms may differ. Taxes, homeowners insurance, mortgage insurance, association dues, lender charges, broker compensation, discount points, third-party charges, and other costs may apply. Advertised rates, payments, APRs, down payments, and other credit terms are subject to the assumptions and disclosures presented with the applicable advertisement.
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