Short answer
Some assistance programs give you a second loan, recorded behind your main mortgage, to help with the down payment or closing costs. Payments may be monthly, deferred until you sell or refinance, or forgiven over time. Fannie Mae calls these Community Seconds; FHA calls it secondary financing. Both limit who can offer it, and any required payment counts in your monthly debts.
Who can offer this kind of second mortgage?
Fannie Mae's Selling Guide (B5-5.1-02) allows Community Seconds loans from a government agency, a city or town, a state housing finance agency, a 501(c)(3) nonprofit, a Federal Home Loan Bank program, your employer, or a federally recognized tribe. The seller or another party to the deal can't be the provider, with narrow exceptions.
For FHA, HUD's Handbook 4000.1 allows a second mortgage held by a federal, state or local government agency, subject to its rules. HUD is clear that a loan that puts a lien on the home is not a gift or grant, even if no payments are due or it can be forgiven.
What can the money be used for?
Under Fannie Mae's rules: the down payment, closing costs, renovations including energy improvements, or a permanent rate buydown. The second loan can't be funded through the first mortgage's pricing. Some programs work by lowering the sales price instead and record the difference as the second loan.
How is it repaid?
- Fannie Mae accepts monthly payments, payments that start later, payments deferred until you sell or the loan ends, or a balance that is forgiven over time. An employer program may require repayment if you leave the job.
- FHA counts any second-mortgage payment in your total monthly payment, doesn't allow costs of the second loan to be added to the FHA loan, doesn't allow cash back except refunds of your own money, and doesn't allow a balloon payment within the first 10 years.
Questions to ask before you use one
- Is it a grant, a forgivable loan or a deferred loan, and when would it have to be repaid?
- Does it have income limits or resale rules? If both the program and the first mortgage have income limits, Fannie Mae applies the stricter one.
- What happens if I refinance? Fannie Mae requires the second-mortgage holder to agree to stay in second place on a rate-and-term refinance.
See also NH Housing down payment assistance and employer homebuying help.
Sources
- Fannie Mae Selling Guide, B5-5.1-01, Community Seconds Loans (05/03/2023)
- Fannie Mae Selling Guide, B5-5.1-02, Community Seconds Loan Eligibility (05/03/2023)
- HUD Single Family Housing Policy Handbook 4000.1, Update 18 (August 2026), Secondary Financing Provided by Governmental Entities
Checked November 2, 2026. Rules and dates change, so confirm current details before you rely on them.
General information only, not tax or legal advice. Program availability, eligibility and terms vary by lender and are subject to change and to underwriting approval. Not a commitment to lend.