Down Payment Grants versus Second Liens in Texas
Texas assistance comes in four shapes. A grant is never repaid. A forgivable lien disappears on a schedule. A deferred lien waits for the day you sell. A repayable lien has a payment. Which one you take changes your rate today and your check at closing years from now.
A grant is money at closing with no lien and no repayment (TSAHC's grant, 2% to 5% of the loan, is repaid only if you refinance or pay off the first mortgage within six months). A forgivable second lien is a recorded 0% second mortgage forgiven over time and repaid only if you sell, refinance or move out early (TSAHC and TDHCA after 3 years, City of Houston over 5 or 8 years, Harris County over 5 or 10 years). A deferred second lien is a 0% second mortgage that is never forgiven and comes due in full when you sell, refinance or pay off the first loan (TDHCA's 30 year option, SETH's 30 year option). A repayable second lien has monthly payments; none of the Houston area programs uses one.
The four structures side by side
| Structure | Lien recorded | Ever repaid | Houston area examples |
|---|---|---|---|
| Grant | No | No, except TSAHC's six month rule on refinancing or paying off the first mortgage | TSAHC grant on FHA, VA and USDA loans (2% to 5%); the $3,500 SETH MCC grant |
| Forgivable second lien | Yes, 0% interest, no payments | Only if you sell, refinance, transfer or move out before it is forgiven | TSAHC 3 year; TDHCA 3 year; SETH 3 year; City of Houston HAP 20% a year over 5 years (12.5% a year over 8 years above $50,000); Harris County DAP 5 or 10 year affordability period |
| Deferred second lien | Yes, 0% interest, no payments | Yes, in full, when you sell, refinance, transfer, pay off the first loan or reach the end of the term | TDHCA 30 year deferred repayable; SETH 30 year deferred |
| Repayable second lien | Yes, with a monthly payment | Yes, monthly | None of the Houston area programs researched uses one |
Why anyone takes the lien instead of the grant
Rate. The programs price the shapes differently. SETH and TDHCA pair the 30 year deferred lien with a lower first mortgage rate than the forgivable lien, and SETH's Best Rate option is lower still with no assistance at all. TSAHC's grant is only available on government loans, so a buyer on a conventional HFA loan takes the 3 year forgivable lien. The right answer depends on how long you expect to keep the home and the loan: a buyer who will refinance in two years should not take a 3 year forgivable lien, because the lien is due at the refinance, and a buyer who will hold for ten years may prefer the lower rate that comes with a deferred lien.
The second cost is the payoff at sale. A $15,000 deferred lien is $15,000 off your proceeds whenever you sell, even in year 25. A forgivable lien is $0 after its period. A grant was never yours to repay. We show all three on the same purchase before you pick, on the Loan Estimate, so the trade is in dollars rather than adjectives.
What happens if you leave early
| TSAHC grant | Nothing, unless you refinance or pay off the first mortgage within six months of closing. |
| TSAHC or TDHCA 3 year forgivable lien | The full amount is due if you sell, refinance, transfer or stop occupying before the third anniversary. Nothing after. |
| City of Houston HAP | The unforgiven pro rata share is due: 20% forgiven per year over 5 years for awards up to $50,000, 12.5% per year over 8 years above that. Less than one year in the home, nothing is forgiven. |
| Harris County DAP | Due on default, sale, rental, transfer or refinance during the affordability period: 5 years under $25,000, 10 years from $25,000 to $40,000. |
| TDHCA or SETH 30 year deferred lien | Due in full on sale, refinance, transfer or payoff of the first lien, with no interest and no prepayment penalty. |
Where these terms come from
Sources, read September 3, 2026
- https://kb.tsahc.org/39170/kb/article/102806/33-assistance-options-nonbond-dpa-with-or-without-mcc-bond-dpa
- https://welcomehome.tdhca.texas.gov/uploads/My-First-Texas-Home-Program-Matrix-TMS.pdf
- https://houstontx.gov/housing/plans-reports/guidelines/hap/Homebuyer_Assistance_Program_HAP_Guidelines-8.0-Entitlement-072126.pdf
- https://hcd.harriscountytx.gov/Portals/hcd/Documents/Down%20Payment%20Assistance/Combine%20DAP%20Fact%20Sheet%20English-Spanish%202026_V3.pdf
- https://www.seth5star.com/
- https://sethfc.com/programs/5-star-texas-advantage/
- https://www.seth5star.com/_files/ugd/bc90e4_98d8791253964bd4a2a5eba56472c8a4.pdf
- https://www.seth5star.com/_files/ugd/bc90e4_9094a2a352424ce493beef92cca7c3c2.pdf
- https://welcomehome.tdhca.texas.gov/programs
- https://welcomehome.tdhca.texas.gov/programs/my-first-texas-home
- https://welcomehome.tdhca.texas.gov/uploads/My-Choice-Texas-Home-Program-Matrix-TMS.pdf
- https://welcomehome.tdhca.texas.gov/uploads/Limits.pdf
- https://welcomehome.tdhca.texas.gov/uploads/transitional-content/tdhca-homebuyer-programs-121025.pdf
Program terms change with funding and with each guideline revision. The program's own document controls; this page records what it said on the date above. Where a program does not publish a term, this page says so.
Questions buyers ask
Do you have to pay back down payment assistance in Texas?
It depends on the structure. A grant is never repaid. A forgivable second lien is repaid only if you sell, refinance or move out before it is forgiven (3 years for TSAHC, TDHCA and SETH, 5 to 10 years for the Houston and Harris County programs). A deferred second lien is repaid in full, without interest, when you sell or refinance.
Is TSAHC down payment assistance a grant or a loan?
Your choice. On FHA, VA and USDA loans it can be a grant with no lien, repaid only if you refinance or pay off the first mortgage within six months of closing. On any loan type, including conventional, it can be a 3 year forgivable second lien at 0% with no payments.
What is a forgivable second lien?
A recorded second mortgage at 0% interest with no monthly payments that is forgiven on a schedule, all at once after 3 years for TSAHC and TDHCA, or a share each year for the City of Houston. It is repaid only if you sell, refinance, transfer or stop living in the home before it is forgiven.
What is a deferred second lien?
A 0% second mortgage with no monthly payments that is never forgiven. It comes due in full when you sell, refinance, transfer or pay off the first loan, or at the end of its 30 year term. TDHCA and SETH offer it in exchange for a lower first mortgage rate.
Why would I take a second lien instead of a grant?
The rate. Programs price the deferred lien with a lower first mortgage rate than the forgivable lien or the grant, and the grant is only available on government loans. A buyer who will hold the home and the loan for many years can come out ahead with the lower rate; a buyer who will refinance soon should avoid any lien that is due at refinance.
Does SETH 5 Star have a grant?
Only the $3,500 that comes with the SETH Mortgage Credit Certificate. The main SETH 5 Star assistance, up to 5% of the loan, is a 3 year forgivable second lien or a 30 year deferred second lien.
Confirm it in one call
The checker reads the published limits. A short call confirms which program fits your address, your household and your timeline, and what it does to your cash to close.
Run the checker above Book 15 minutes with Ben
InSync Homes and Loans. Ben Helstein, Texas real estate broker and mortgage loan originator, NMLS #1577314. InSync Loans NMLS #1829321. Equal Housing Opportunity. Nothing on this page is a commitment to lend or a guarantee of terms; every loan is subject to lender underwriting, property review, and credit approval. Cap rate estimates are screens built from public listing data and market rents, not appraisals.