DPA repayment terms vary by program. Forgivable loans typically require you to stay in the home for 3 to 10 years. If you sell or move before the forgiveness period ends, you must repay a prorated portion. Some programs require full repayment if you sell early. Federal recapture taxes may also apply if the assistance is forgiven.
Typical Forgiveness Schedules
Most Texas DPA programs use a gradual forgiveness schedule. Example: 20% forgiven per year over 5 years. After year 1, you owe 80%. After year 3, you owe 40%. After year 5, you owe 0%. Some programs forgive 100% after a fixed period (e.g., 3 years) with no gradual forgiveness. Always check your specific program's terms.
What Triggers Repayment
Repayment is typically triggered by: selling the home before the forgiveness period ends, refinancing to cash out equity, converting to a rental property, or failing to occupy the property as your primary residence. Most programs allow you to keep the assistance if you stay for the full period.
Recapture Tax Considerations
Forgiven DPA amounts may be considered taxable income by the IRS. Some programs issue a 1099-C for the forgiven amount. Consult a tax professional about potential tax liability. Texas has no state income tax, so state-level recapture is not an issue, but federal taxes may apply.