Chenoa Fund Down Payment Assistance

What Is Chenoa Fund Down Payment Assistance?

For many buyers, saving for a down payment is the single biggest barrier to homeownership. The Chenoa Fund solves that problem by providing a second mortgage that covers the 3.5% down payment required on an FHA loan. The result is 100% financing: the FHA first mortgage covers 96.5% of the purchase price, and the Chenoa Fund second mortgage covers the rest. You can buy a home without spending years saving up.

The program is available in all 50 states except New York, and the guidelines are the same no matter where you buy. Unlike many state or local assistance programs that run out of funding or only apply in certain zip codes, Chenoa Fund assistance is funded year-round.

You choose between two second mortgage options. The forgivable option carries 0% interest and requires no monthly payments. The repayable option is a standard loan with a 10-year term. Both can provide either 3.5% or 5% of the purchase price, depending on your needs.

Key Benefits

Zero Down Payment Required

When paired with an FHA loan, the Chenoa Fund covers your entire minimum down payment. That means you can purchase a home with no money out of pocket for the down payment itself. You may still need funds for closing costs, but seller concessions, lender credits, or gift funds can often help cover those.

A Forgivable Option With No Monthly Payments

The forgivable second mortgage is a 30-year lien at 0% interest with no required monthly payments. If you make 36 consecutive on-time payments on your FHA first mortgage (for 3.5% assistance) or 120 consecutive on-time payments (for 5% assistance), the second mortgage is forgiven entirely. If you miss a payment, the clock resets, but you have the full 30-year term to meet the forgiveness conditions. Any remaining balance is also forgiven at the end of 30 years.

No Income Limits on the Repayable Option

Many down payment assistance programs are restricted to low-income households. The Chenoa Fund repayable second mortgage has no income cap, which means buyers at a wide range of income levels can qualify. This is a real advantage if you earn too much for most assistance programs but still have not been able to save enough for a down payment.

Credit Scores Starting at 600

The program accepts credit scores as low as 600, which is lower than many assistance programs that require 620 or higher. If your score is between 600 and 639, you will need to complete a homebuyer education course through a HUD-approved agency, but the course is provided at no cost to you.

Program Details at a Glance

Things to Know Before You Apply

Primary residence only.

This program is for the home you plan to live in. Investment properties and second homes are not eligible.

FHA mortgage insurance applies.

Because the first mortgage is an FHA loan, you will pay an upfront mortgage insurance premium (typically financed into the loan) and a monthly mortgage insurance premium for the life of the loan. Many buyers plan to refinance into a conventional loan once they build enough equity, which can remove the monthly premium and lower their overall payment.

Your rate may be slightly higher than a standard FHA loan.

FHA loans paired with down payment assistance may carry a modestly higher interest rate. That said, a slightly higher rate is not necessarily a bad thing if it means you can buy now instead of spending years saving. You start building equity from day one, and refinancing to a lower rate is always an option down the road.

Selling or refinancing before forgiveness.

If you sell, refinance, or transfer the title before the forgivable second mortgage is fully forgiven, you will need to repay the full assistance amount at that time. If you are using the 3.5% forgivable option, plan to stay in the home for at least three years.

Homebuyer education may be required.

Borrowers with credit scores below 640 must complete a homebuyer education course before closing. The course is provided at no cost and covers topics that help set you up for long-term success as a homeowner.

Who Is This Loan Best For?

• Buyers who can handle a monthly mortgage payment but have not been able to save enough for a down payment
• First-time homebuyers who want to stop renting and start building equity now
• Repeat buyers who do not have equity from a previous home sale to put toward a new purchase
• Borrowers with credit scores in the 600–680 range who may not qualify for other assistance programs
• Buyers in areas where local assistance programs have limited funding or long waitlists

Alternatives to Chenoa Fund Down Payment Assistance

FHA loan without assistance.

If you can cover the 3.5% down payment on your own or with gift funds, a standard FHA loan may offer a lower rate. This is worth comparing if you have some savings and want to see which option results in a lower monthly payment.

Conventional loan with low down payment.

Conventional loans allow down payments as low as 3%. If your credit score qualifies, a conventional loan may offer lower monthly costs over time since private mortgage insurance can be removed once you reach 20% equity.

State and local assistance programs.

Many states and counties offer their own down payment grants or forgivable loans. These vary widely in availability and requirements. Our team can help you compare what is available in your area.

Frequently Asked Questions

What is the Chenoa Fund?

The Chenoa Fund is a nationwide down payment assistance program that provides a second mortgage to cover the 3.5% or 5% down payment required on an FHA loan. It is funded year-round and available in every state except New York.

Do I have to pay back the assistance?

It depends on which option you choose. The forgivable second mortgage is forgiven after you make 36 consecutive on-time payments on your FHA loan (for 3.5% assistance) or 120 on-time payments (for 5% assistance). The repayable option requires monthly payments over a 10-year term.

What happens if I miss a payment on the forgivable option?

The forgiveness clock resets, and you start a new 36- or 120-payment period. You are not penalized beyond the reset, and you have the full 30-year term of the second mortgage to meet the forgiveness conditions. Any remaining balance is also forgiven at the end of 30 years.

Do I have to be a first-time homebuyer?

No. Both first-time and repeat buyers can qualify. There is no requirement that you have never owned a home before.

Can I use this program with a conventional loan?

Not currently. Chenoa Fund assistance is available only with FHA first mortgages. A conventional option existed previously but has been suspended. If a conventional loan is a better fit for your situation, our team can walk you through other low-down-payment options.

Is Chenoa Fund Down Payment Assistance Right for You?

If saving for a down payment has been the main thing standing between you and homeownership, this program can help you get into a home sooner. With a forgivable option that requires no monthly payments, a repayable option with no income limits, and credit scores starting at 600, it is one of the most accessible assistance programs available.

The best way to find out if you qualify is to talk to one of our mortgage experts at JVM Lending. Contact us today at (855) 855-4491 or hello@jvmlending.com for a free consultation.