Is DPA Forgivable

Forgiveness is not automatically processed the moment the 36th payment clears. Once you have successfully made 36 consecutive, on-time payments on your first mortgage, you must actively request forgiveness from CBC Mortgage Agency. You will typically need to contact the servicing department (often via email at servicing@chenoafund.org) to initiate the review of your payment history. Upon verification that the conditions have been met, you will generally be required to pay a processing fee to cover the administrative costs of preparing and recording the lien release, at which point the debt is officially extinguished.

No, the balance of the forgivable second mortgage does not grow over time. This product carries an interest rate of 0%. This means that if you trigger a repayment event—such as selling your home in year two—you will only be responsible for repaying the original principal amount of the assistance provided. There is no accrued interest to pay back. This contrasts with the Repayable Second Mortgage, which carries an interest rate higher than the first mortgage and involves paying significant interest over the life of the 10-year loan term.

No, the Repayable Second Mortgage is a distinct product from the Forgivable Second Mortgage and does not offer a forgiveness feature. If you choose the repayable option—often selected by borrowers with higher incomes who exceed the limits for the forgivable product—you are taking on a fully amortizing loan. This loan has a 10-year term and requires monthly principal and interest payments. The interest rate is typically set 1% higher than your first mortgage rate. You are contractually obligated to pay off the entire balance over the 10-year period, regardless of your payment history or how long you stay in the home.

If you sell your home or transfer the title to another party before you have satisfied the forgiveness conditions (making 36 consecutive on-time payments), the loan is not forgiven. Instead, the full principal amount of the down payment assistance becomes immediately due and payable. Because the forgivable product carries a 0% interest rate, you would typically only owe the original amount borrowed, without accrued interest. This debt must be paid off from the proceeds of the sale at closing, just like your primary mortgage or any other lien attached to the property title.

Refinancing your first mortgage is a major “trigger event” that can jeopardize the forgivable nature of the assistance. Generally, if you refinance the first mortgage before the 36-month forgiveness period is complete, the second mortgage permanently loses its forgivable status. In this scenario, the loan remains a 0% interest loan with no monthly payments, but the debt will never be forgiven. It essentially becomes a “silent” balloon loan that must be repaid in full upon a future sale, a subsequent refinance, or at the end of the 30-year term. Subordination of the lien is typically not allowed during the initial forgiveness period.

Yes, under the most recent program guidelines (Version 12.27), the forgiveness terms have been unified for both assistance levels. Whether you receive 3.5% or 5% down payment assistance, the forgiveness requirement is 36 consecutive, on-time payments on your FHA first mortgage. In the past, some variations of the program may have required a longer period (such as 10 years) for the higher 5% assistance amount, but current standards apply the 36-month rule to both. However, borrowers should always verify the specific terms listed in their final loan documents, as older product variations might still exist in the marketplace.

No, if you choose the forgivable second mortgage option, you are not required to make monthly payments on the assistance balance. This loan is structured with a 0% interest rate and a 30-year term, but it sits in a “silent” second position. As long as you remain in the home and are working toward the forgiveness conditions on your first mortgage, this second lien requires no monthly cash flow from you. This feature is designed to keep your monthly housing obligations lower during the early years of homeownership, provided you do not trigger a repayment event like a sale or refinance.

The Chenoa Fund includes a “reset” provision that acts as a safety net for borrowers. If you make a payment on your first mortgage that is 30 days or more delinquent during the initial 36-month forgiveness period, you do not automatically default on the assistance loan. Instead, the 36-month forgiveness counter resets to zero. You remain eligible for forgiveness, but you must start a new streak of 36 consecutive on-time payments. This reset option remains available for the entire 30-year term of the loan, giving you multiple opportunities to demonstrate the payment stability required to have the debt erased.

For the assistance to be forgiven, you must demonstrate a consistent history of on-time payments on your first mortgage. Under current program guidelines, forgiveness for both the 3.5% and 5% assistance amounts occurs after you make 36 consecutive, on-time payments on your FHA first mortgage. “On-time” is generally defined as the payment being made within the month it is due and not becoming 30 days or more delinquent. It is crucial to maintain this streak without interruption; otherwise, the countdown to forgiveness will stop, and you will be required to restart the qualifying period from the beginning.

Technically, the Chenoa Fund down payment assistance is not structured as an upfront gift or grant at the closing table. Instead, it is legally recorded as a second mortgage lien against your property. This ensures that the borrower adheres to specific requirements regarding occupancy and payment history. However, if you select the forgivable product option—often referred to as a “soft second”—the loan is designed to eventually function like a gift. Once you meet the specific forgiveness conditions, the principal balance is waived, and the lien is released, meaning you never have to pay back the funds provided for your down payment.