Forgivable Loans for First-Time Home Buyers 2026
A forgivable loan is free down payment money that disappears after 5-10 years. No monthly payments, no interest. Here is how to get $10,000-$25,000 in your state.
Quick Summary
A forgivable loan is a second mortgage that is forgiven after you live in the home for 5-10 years. You pay nothing monthly. If you stay until the forgiveness period ends, the loan is eliminated — it becomes a grant. If you sell or move early, you repay a prorated portion. Most programs offer $10K-$25K and require first-time buyer status, 620+ credit score, and completion of a homebuyer education course.
Find Forgivable Loan Programs in Your State
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Find My Programs →What Is a Forgivable Loan?
A forgivable loan is a zero-interest, zero-payment second mortgage provided by state housing finance agencies (HFAs) to help first-time home buyers cover down payment and closing costs. The loan is "forgiven" (eliminated) gradually over a set period — typically 5, 10, or 15 years.
Example: You receive a $15,000 forgivable loan with a 10-year forgiveness period. Each year, $1,500 of the loan is forgiven. After 10 years, the entire $15,000 is forgiven — you owe nothing. If you sell at year 5, you repay $7,500 (the un-forgiven portion). Find lenders in your state that offer forgivable loans.
Forgivable Loan vs Grant vs Traditional DPA
| Feature | Forgivable Loan | Grant | Traditional DPA |
|---|---|---|---|
| Monthly payments | None | None | Yes (often 0%) |
| Interest | 0% | N/A | 0% usually |
| Repayment required | Only if move early | Never | Always |
| Typical amount | $10K-$25K | $1K-$5K | $5K-$15K |
| Forgiveness period | 5-10 years | Immediate | None |
| Availability | Common (40+ states) | Limited | Common |
Top Forgivable Loan Programs by State (2026)
| State | Program | Max Amount | Forgiveness |
|---|---|---|---|
| California | CalFHA MyHome | $15,000 | 5 years |
| Texas | TDHCA My First TX | $25,000 | 10 years |
| Florida | HHL Florida | $10,000 | 5 years |
| New York | SONYC Achieve | $15,000 | 10 years |
| Massachusetts | ONE Mortgage | $15,000 | 7 years |
| Illinois | IDHA 1stHome | $10,000 | 5 years |
| Colorado | CHFA SmartStep | $5,000 | 3 years |
| Georgia | DCA Georgia Dream | $7,500 | 5 years |
| North Carolina | NCHFA Advantage | $8,000 | 5 years |
| Washington | WSHFA Home Advantage | $10,000 | 5 years |
Amounts and terms vary by county and income level. Check your state HFA website for current 2026 limits. See which programs you qualify for in your state.
Not sure which programs you qualify for?
Check My Eligibility →How Forgiveness Works (Real Example)
Scenario: You buy a $350,000 home with 3.5% down ($12,250). You receive a $15,000 forgivable loan from your state HFA with 10-year forgiveness.
| Year | Amount Forgiven | Remaining Balance | If You Sell |
|---|---|---|---|
| Year 1 | $1,500 | $13,500 | Repay $13,500 |
| Year 3 | $4,500 | $10,500 | Repay $10,500 |
| Year 5 | $7,500 | $7,500 | Repay $7,500 |
| Year 7 | $10,500 | $4,500 | Repay $4,500 |
| Year 10 | $15,000 | $0 | Owe nothing |
You paid $0 monthly for 10 years. After year 10, the $15,000 is completely forgiven. Total cost to you: $0.
Who Qualifies for Forgivable Loans?
- First-time home buyer: No home ownership in the past 3 years (some programs waive this in targeted areas)
- Income limits: Typically 80% AMI, some programs allow up to 120% AMI
- Credit score: Minimum 620-640 (varies by program). Check your eligibility with approved lenders
- DTI ratio: Maximum 43-45% (some programs allow up to 50%)
- Homebuyer education: Complete an 8-hour course (free, online)
- Primary residence: Must live in the home (no investment properties)
- Loan amount: Within conforming loan limits ($806,500 in most areas for 2026)
Get Pre-Approved with Forgivable Loan Programs
Lenders in our network work with state HFA programs. Get pre-approved and see which forgivable loans you qualify for.
Get Pre-Approved Free →No SSN • Soft credit pull • 2-minute application
How to Apply for a Forgivable Loan (Step by Step)
- Find your state HFA: Search "[your state] housing finance authority" or visit ncsha.org for a directory. Browse DPA programs by state.
- Check eligibility: Verify income limits, first-time buyer status, and credit requirements.
- Complete homebuyer education: Most programs require an 8-hour course. Many offer it free online.
- Find an approved lender: HFA programs work with specific lenders. Your state HFA website will have a list. Compare HFA-approved lenders.
- Get pre-approved: Submit income docs, credit check, and employment verification to an approved lender. Start your pre-approval now.
- Find a home: Shop within the program's purchase price limits.
- Close with forgivable loan: The forgivable loan is recorded as a second mortgage at closing. You pay nothing monthly.
Important Things to Know
- Refinancing risk: Some programs require repayment if you refinance the first mortgage. Check before refinancing.
- Selling early: If you sell before the forgiveness period ends, you repay the prorated balance from sale proceeds.
- Renting out: You must live in the home. Converting to a rental may trigger full repayment.
- Recapture tax: Some federal programs have a recapture tax if you sell within 9 years and profit significantly. Most state programs do not.
- Stacking: Many programs let you combine a forgivable loan with other DPA (grants, tax credits) for even more savings.
Frequently Asked Questions
Can I combine a forgivable loan with an FHA loan?
Yes. Forgivable loans work with FHA, conventional, VA, and USDA loans. FHA is the most common pairing because of its low 3.5% down payment and 580 credit score minimum. Compare FHA lenders that accept forgivable DPA loans.
Are forgivable loans taxable income?
Generally no — forgiven DPA loans are not taxed as income. However, consult a tax professional, as rules can vary by state and program. The Mortgage Forgiveness Debt Relief Act may apply in some cases.
What happens to my forgivable loan if the housing market crashes?
If you stay in the home, the forgiveness continues on schedule regardless of market conditions. If you sell for less than you owe, the forgivable loan is repaid from sale proceeds first, then your first mortgage. If proceeds are insufficient, some programs offer hardship waivers.
How do I find forgivable loan programs in my state?
Search your state housing finance agency (HFA) website or use our DPA finder to see programs in your state. Most states have 1-3 forgivable loan programs with different income limits and amounts.
Can I use a forgivable loan with a conventional loan?
Yes. Most forgivable loan programs work with conventional loans (Fannie Mae HomeReady, Freddie Mac Home Possible). Conventional requires 3-5% down and 620+ credit. Get pre-approved with a conventional lender that accepts DPA.
What is the maximum income to qualify for a forgivable loan?
Most programs require income below 80% of Area Median Income (AMI), but some allow up to 120% AMI in high-cost areas. For a family of 4 in Los Angeles, 80% AMI = $94,600. In rural areas, limits are lower. Check income limits for your area.
Can I stack a forgivable loan with other down payment assistance?
Yes. Many states allow stacking — combining a forgivable loan with a grant, MCC tax credit, or employer DPA. Total assistance can reach $30K-$40K. Compare lenders that allow DPA stacking.
Ready to Get Your Forgivable Loan?
Compare lenders who work with state HFA programs. See how much down payment assistance you qualify for — up to $25K forgivable.
Compare Lenders & See Programs →Free • No SSN • Soft credit pull only • Updated Sept 2026