Get help with homebuying with a Community Seconds or Affordable Seconds mortgage

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If you don’t have thousands of dollars saved for a down payment and closing costs, Community Seconds and Affordable Seconds, two mortgage programs, can help bridge the gap. Both allow low- and moderate-income homebuyers to finance these costs instead of paying for them upfront.

What is a Community Seconds or Affordable Seconds mortgage?

Fannie Mae’s Community Seconds and Freddie Mac’s Affordable Seconds are second mortgage programs that can help you buy a home if you don’t have a lot of money saved. These second mortgages are used in conjunction with a first mortgage, such as a HomeReady or Home Possible mortgage, and can be used to pay for the down payment on a home, closing costs, renovations and other upfront expenses. With the combination of the two mortgages, buyers aren’t obligated to put anything down on the purchase.

The financing doesn’t come from Fannie Mae or Freddie Mac, however. Instead, it comes from a public or private source, such as:

  • Federal agencies
  • Municipalities, counties or the state
  • Local or state housing finance authorities
  • Nonprofits (not credit unions)
  • Regional Federal Home Loan Banks
  • Federally-recognized Native American tribes
  • Employers

The repayment of the second mortgage can be structured in different ways, and depends on the program. Some acceptable ways include:

  • Fixed monthly payments
  • Deferred payments for a time, then fixed monthly payments
  • Deferred payments for the length of the loan term (unless the home is sold)

In the case of a grant or similar source of funds, the second mortgage might instead be forgiven after a certain period of time.

Who is eligible for Community Seconds or Affordable Seconds mortgages?

Homebuyers interested in these programs must be purchasing a home for use as their primary residence, not a second home or investment property.

Depending on the source of the financing, buyers could also be subject to income thresholds or other requirements, such as a homebuyer education class or, in the case of an employer program, a certain length of time with the company or organization.

Community Seconds and Affordable Seconds requirements

Each organization offering Community Seconds and Affordable Seconds financing has its own specific program criteria, informed by guidelines from Fannie Mae and Freddie Mac. These guidelines include:

Community Seconds

  • The combined loan-to-value ratio (CLTV) for the first and second mortgages can be up to 105 percent.
  • The first mortgage can be a fixed-rate or adjustable-rate loan, provided the adjustable-rate loan has an initial fixed-rate period of at least five years.
  • The second mortgage can fund the down payment, closing costs, renovations or a permanent interest rate buydown (paying points).
  • The interest rate on the second mortgage (if there is one) can’t be more than two percentage points higher than the rate of the first mortgage.
  • The second mortgage can’t be funded through “premium pricing,” meaning that the borrower can’t pay a higher interest rate on the first mortgage to get a credit at closing. (Some housing finance agencies are exempt from this limitation, however.)

Affordable Seconds

  • The CLTV for the first and second mortgages can be up to 105 percent if the first mortgage is a Home Possible or HomeOne loan. The CLTV can be up to 95 percent if the first mortgage is a conventional loan.
  • The first mortgage can be a fixed-rate or adjustable-rate loan, provided the adjustable-rate loan has an initial fixed-rate period of at least five years.
  • The second mortgage can fund the down payment or closing costs.
  • The interest rate on the second mortgage (if there is one) can’t be more than two percentage points higher than the rate of the first mortgage.

Community Seconds and Affordable Seconds: Pros and cons

Pros Cons
  • Accelerates the path to homeownership for those without a lot of savings
  • Can borrow all or part of the down payment, closing costs and other expenses
  • May be able to defer payments or have the second-mortgage debt forgiven over time, depending on the program
  • A second mortgage adds to your total debt and interest costs (unless the debt is forgiven over time)
  • Potential for a larger total monthly payment
  • Can’t be used for a second home or investment property

Alternative down payment assistance options 

The Community Seconds and Affordable Seconds programs are financing options that can help you buy a home sooner if your savings are limited. However, there are other down payment assistance programs you might also be able to qualify for, particularly if you’re a first-time homebuyer (usually meaning you haven’t owned a home in the past three years). Start with the U.S. Department of Housing and Urban Development’s state lookup, where you can check for assistance programs from your local housing authority.

Learn more:

Written by
Jeanne Lee
Contributing writer
Jeanne Lee writes about mortgages, personal finance and enjoys finding ways for people to hack their finances.
Edited by
Mortgage editor