What Lenders Need to Know About NIFA's Second Mortgage Programs

Most Nebraska homebuyers do not have a large down payment sitting in savings. That is not a character flaw. It is just the reality of housing costs relative to incomes, especially for first-time buyers and low- and moderate-income households. The Nebraska Investment Finance Authority addresses this directly through two paired second mortgage programs: the Homebuyer Assistance program and the Welcome Home Assistance program.

If you are a lender who works with Nebraska borrowers and you are not already familiar with these products, this guide covers the mechanics, the eligibility requirements, and the practical things you need to know to originate them confidently.

What a NIFA Second Mortgage Is

A NIFA second mortgage is a subordinate loan that pairs with a NIFA first mortgage to cover down payment and closing costs. It is not a grant. It is not forgivable. It is a real loan with real terms, and borrowers need to understand that before they close.

Here is how it works. A borrower takes a NIFA first mortgage through a participating lender. They also take a NIFA second mortgage at 1% interest on a 10-year term. The second mortgage covers up to 5% of the purchase price.That structure is straightforward and the terms are favorable, but lenders who have not seen it before sometimes have questions about how it works in practice. The short answer: it originates through you, the participating lender, just like the first mortgage. NIFA sets the terms. You handle the transaction.

The Two Programs: HBA and WHA

Homebuyer Assistance Program (HBA)

The HBA program pairs with NIFA’s First Home Loan program, which is designed for first-time homebuyers. A first-time buyer, for NIFA’s purposes, is someone who has not owned a primary residence in the past three years. There is one exception: buyers purchasing in a federally designated Targeted Census Tract do not need to meet the first-time requirement.

HBA credit score requirements:

1. 640 minimum with a debt-to-income ratio at or below 45%
2. 660 minimum with a debt-to-income ratio at or below 50%

All HBA borrowers must complete an approved homebuyer education course before closing. Flag this early in the process. It is available online and does not take long, but it cannot happen after closing.

Welcome Home Assistance Program (WHA)

The WHA program pairs with NIFA’s Welcome Home Loan program, which is open to both first-time and repeat buyers. Welcome Home carries higher income and purchase price limits than the First Home program, which means some borrowers who fall just outside First Home eligibility can qualify here.

The second mortgage structure is identical to HBA: 1% interest, 10-year term, up to 5% of the purchase price..

If you have a borrower who previously owned a home and does not qualify for First Home or HBA, Welcome Home and WHA are worth checking before you rule out NIFA entirely.

What Borrowers Are Eligible

Eligibility for NIFA second mortgage programs depends on several factors. Here is a summary:

1. Income limits: Vary by program and county. Current limits are posted at nifa.org and updated regularly. Do not rely on prior-cycle figures.
2. Purchase price limits: Vary by county, number of units, and whether the property is in a Targeted Census Tract. Properties in targeted areas may have higher limits.
3. Primary residence requirement: NIFA loans are for primary residences only. No investment properties, no second homes.
4. Occupancy: Borrowers must occupy the home within 60 days of closing.
5. Business use: No more than 15% of the property can be used for business purposes.
6. Homebuyer education: Required for HBA and WHA first-time buyers. Must be completed before closing.

How the Loan Process Works for Lenders

NIFA loans originate through participating lenders. If your institution is not yet a NIFA participating lender, that is the starting point. You can find information on becoming a participating lender at nifa.org.

For lenders already in the network, the process follows standard mortgage timelines. You originate and package the loan under NIFA’s guidelines, and it moves through NIFA’s system from there. Work with your borrower’s timeline realistically, particularly in high-volume seasons when processing windows extend.

NIFA posts current interest rates daily at nifa.org/interest-rates. Rates move. If a borrower has found terms they like, getting them under contract and into the loan process promptly is in their interest.

Common Questions from Lenders New to NIFA

Is the second mortgage visible on the closing disclosure?

Yes. It is a subordinate loan, and it will appear in the loan documentation like any second mortgage. Sellers and listing agents occasionally ask about it. Being able to explain it clearly, that it is a standard NIFA product and a common structure for Nebraska buyers, helps keep transactions together.

Does the second mortgage affect the borrower’s DTI calculation?

Yes, the second mortgage payment factors into DTI. The 1% interest on a 10-year term keeps the payment relatively low, but it is part of the calculation. Run your numbers accordingly.

What if my borrower does not qualify for NIFA’s first mortgage?

The second mortgage only pairs with a NIFA first mortgage. If a borrower does not qualify for the first mortgage program, the assistance program is not available to them independently. Check whether a different NIFA first mortgage program might be a better fit before closing out the option.

Can the second mortgage be used for multi-unit properties?

Properties with two to four units are eligible for NIFA financing with some additional requirements. Single-family homes are the most common use case. Contact NIFA if you have a multi-unit situation.

Resources for Participating Lenders

• Current interest rates (updated daily): nifa.org/interest-rates
• Program eligibility details: nifa.org/lenders-realtors/programs-eligibility
• Homebuyer education information: nifa.org/homebuyers-renters/homebuyer-education
• Geocoding/Mapping System for Targeted Census Tracts: nifa.org/lenders-realtors/first-home
• Marketing materials: nifa.org/lenders-realtors/marketing-materials

Related Reading

• How Real Estate Agents Can Work With NIFA to Help More Nebraska Buyers Succeed: A practical guide for agents, with program overviews and consultation frameworks that complement what lenders need to know.
• A Buyer’s Guide to Affordable Housing Programs in Nebraska: Share this with borrowers who want to understand all their options before they sit down with a lender.

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