Community Seconds are subordinate loans from approved sources like state HFAs, nonprofits, or employers that help homebuyers with down payments and closing costs. This addresses how Community Seconds work for down payments by acting as a second mortgage layered onto a primary loan, often with low-interest, deferred, or forgivable terms. They boost affordability and are typically eligible for Fannie Mae’s or Freddie Mac’s guidelines, allowing combined loan-to-value ratios up to 105%.
This guide breaks down what Community Seconds are, how they work, and which states offer the most impactful programs for 2025.
What Are Community Seconds?
Community Seconds are a form of subordinate financing layered on top of a first mortgage. These second loans help homebuyers cover:
- Down payment
- Closing costs
- Renovations
- Interest rate buydowns
They are typically low-interest, deferred, or even forgivable loans—designed to help buyers access affordable housing without requiring large upfront savings.
Unlike standard second mortgages, Community Seconds must come from approved sources such as:
- State and local housing finance agencies
- Nonprofit housing organizations
- Employer housing benefit programs
- Tribally designated housing entities
They are often paired with Fannie Mae’s Community Seconds® guidelines or Freddie Mac’s Affordable Seconds®, which allow combined loan-to-value (CLTV) ratios of up to 105%—meaning buyers can finance more than just the home’s purchase price.
Fannie Mae and Freddie Mac Guidelines
Fannie Mae and Freddie Mac allow first-lien lenders to combine their conventional mortgage products (like HomeReady or HFA Preferred) with Community Seconds financing. Under their guidelines:
- The total combined LTV can go up to 105%
- The second lien must be from an eligible provider
- Repayment can be amortizing, deferred, or forgivable
- Maximum interest rate is typically capped at 2% above the first mortgage
This makes Community Seconds a powerful tool for buyers who:
- Need help with upfront costs
- Want to preserve cash for renovations or emergencies
- Qualify for a first mortgage but lack immediate liquidity
Benefits of Community Seconds
Affordability Boost
By covering the down payment and closing costs, Community Seconds remove one of the biggest barriers to homeownership.
Lower Monthly Payments
Many second liens are zero-interest or have delayed payments, helping buyers manage monthly obligations more easily.
Flexibility
Different repayment structures—deferred, forgivable, or long-term fixed—allow buyers to choose what works best for them.
Preservation of Savings
Buyers can keep their savings intact for future repairs, emergencies, or investment.
Top State and Local Community Seconds Programs in 2025
1. New Jersey Housing and Mortgage Finance Agency (NJHMFA)
New Jersey has emerged as a leader in 2025 for robust layered financing.
- Program: NJHMFA Down Payment Assistance Program
- Amount: Up to $15,000 (forgivable second mortgage)
- Additional Support: An extra $7,000 is available for first-generation homebuyers, raising total assistance to $22,000
- Terms: Zero-interest and forgiven after five years if the home remains a primary residence
- Eligibility: Income and purchase price limits apply; must be a first-time buyer or purchase in a targeted area
This program is especially beneficial for intergenerational households or families affected by historical barriers to homeownership.
2. Connecticut Housing Finance Authority (CHFA)
Connecticut continues to offer one of the most versatile and extensive portfolios of Community Seconds in 2025.
Key Programs:
- DAP Grant: Up to 3.5% of purchase price, non-repayable
- IHD Access Forgivable: Up to $6,000, forgiven over time
- IHD Access Deferred: Interest-free, repayable only at sale/refinance
- Home Advantage Deferred Loan: Up to 5%, deferred 30 years
- Opportunity DPA Loan: Up to $15,000 at 1% interest, deferred
- Veterans Program: $10,000 at 3% interest, 30-year term
CHFA programs are available statewide, often bundled with their low-interest first mortgages.
3. Colorado Housing and Finance Authority (CHFA)
Colorado offers two Community Seconds programs that are especially helpful in high-cost urban areas.
- Forgivable Second Mortgage: Up to 3% of the purchase price
- Repayable Zero-Interest Loan: Up to 4%, due upon sale or refinance
- Eligibility: CHFA-approved lenders only; income limits apply
Colorado also mandates homebuyer education, ensuring informed, prepared purchasers.
4. Texas State Affordable Housing Corporation (TSAHC)
In Texas, TSAHC supports moderate-income buyers through flexible and accessible assistance options.
- DPA Structure: Can be a grant or a second lien
- Terms: Many are forgivable over three to five years
- Target Audience: Teachers, veterans, healthcare workers, and first-time buyers
- Extra Benefit: May be layered with employer-funded housing incentives
TSAHC programs are statewide and often tailored to professionals in public service roles.
Illustrative Example: How It Works
Let’s say you’re purchasing a home in Connecticut for $300,000:
- Primary Loan (97%): $291,000
- CHFA DAP Grant (3%): $9,000
- CHFA IHD Deferred Loan (up to 5%): $15,000
- Total Financing: $315,000 (105% CLTV)
This structure allows you to:
- Avoid out-of-pocket closing costs
- Potentially secure a better rate with a CHFA first mortgage
- Retain savings for future expenses
Important Considerations Before Applying
Repayment Triggers
Many Community Seconds are deferred or forgivable, but be aware:
- Forgiveness typically requires primary residence occupancy for 3–10 years
- Selling or refinancing too early may trigger full or partial repayment
Income and Purchase Limits
Most programs have eligibility thresholds based on area median income (AMI) and local home prices.
Homebuyer Education
Completion of HUD-certified homebuyer education is often required—and recommended even when optional.
Lender Participation
Not all lenders participate in Community Seconds programs. Work with state-approved lenders or ask for one with HFA experience.
Top Community Seconds Programs in 2025
State |
Program |
Max Assistance |
Repayment Terms |
Forgivable? |
| New Jersey | NJHMFA DPA + First-Gen Grant | Up to $22,000 | Deferred; forgiven after 5 yrs | Yes |
| Connecticut | CHFA Multiple DPA Options | Up to $15,000+ | Some deferred, some forgivable | Mixed |
| Colorado | CHFA Forgivable & Deferred Loans | Up to 4% of price | Forgiven or deferred until sale | Yes/No |
| Texas (TSAHC) | DPA Grant or Second Lien | Varies | 3–5 years; many forgivable | Often |
Final Thoughts
Community Seconds offer an incredible opportunity to make homeownership more attainable, especially for those who are mortgage-ready but cash-light. In 2025, more states are embracing layered financing as a strategy to combat affordability challenges and close racial and generational homeownership gaps.
Whether you’re a first-time buyer, a low-to-moderate income household, or a real estate professional guiding clients, understanding these programs is essential. The combination of forgivable loans, low interest, and deferred repayment creates a runway for sustainable, responsible homeownership.