Forgivable loan

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Definition

A forgivable loan is a loan that can be reduced or canceled over time if program conditions are met. It is not a grant and not the same as a deferred second loan that remains repayable.

In plain English

Some down-payment or employer programs start as a loan and later cancel part or all of the balance if the borrower keeps the home and follows the program rules. A grant does not start as debt. A deferred second loan may still have to be repaid later even if no payment is due now.

Technical definition

Fannie Mae Community Seconds and employer-assistance headings treat debt forgiveness over time as a distinct subordinate-loan structure and are PRIMARY.

Why it matters

Assistance menus mix grants, deferred seconds, and forgivable seconds. Readers need forgiveness kept distinct from postponed repayment.

Commonly confused with

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Important note

Forgiveness terms, occupancy conditions, and recapture rules vary by program. A forgivable loan is not a grant and is not the same as a deferred second loan that remains repayable.

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