A DPA grant is free money that never needs to be repaid. A forgivable loan is a loan that is forgiven after you meet certain conditions, typically staying in the home for 3 to 10 years. If you sell or move before the forgiveness period ends, you must repay a portion. Grants are better but harder to find. Forgivable loans are more common in Texas DPA programs.
What a DPA Grant Is
A grant is true free money. It does not need to be repaid under any circumstances. True grants are rare. Most programs labeled as grants are actually forgivable loans. If the funds do not need to be repaid, that is a grant. Check the fine print carefully.
What a Forgivable DPA Loan Is
A forgivable loan is a 0% interest loan that is forgiven in stages over time. Example: $10,000 forgiven at 20% per year. After year 1, $8,000 remains. After year 5, $0 remains. If you sell in year 2, you repay $6,000. Most Texas DPA programs use forgivable loans with 3 to 10 year forgiveness periods.
Which Is Better for You?
A grant is always better if available. But forgivable loans are still excellent because the forgiveness period is limited. If you plan to stay in the home for at least 3-5 years, a forgivable loan may be fully waived before you sell. Compare the forgiveness schedule against your expected timeline.