What Is a Community Seconds Loan — and Can It Cover My Entire Down Payment?
A Community Seconds loan is an approved subordinate financing program that can be layered on top of a conventional first mortgage to cover your down payment — and in some cases your closing costs too. Here is how it works.
What is a Community Seconds loan?
A Community Seconds mortgage is a second lien loan from an eligible government or nonprofit source that is subordinate to a Fannie Mae first mortgage. The program was designed to allow creditworthy borrowers with limited savings to purchase a home by filling the gap between what they can put down and what the first mortgage requires.
Key feature: when a Community Seconds loan is part of the transaction, the combined loan-to-value (CLTV) can go up to 105%. This means a buyer can potentially purchase with zero out-of-pocket — the first mortgage covers 97% of the price, and the Community Seconds loan covers the remaining 3% and possibly some closing costs.
Who can provide a Community Seconds loan?
Eligible providers include: federal, state, and local government agencies; HUD-approved nonprofits; employers through established assistance programs; Federal Home Loan Banks; and other entities approved by Fannie Mae. The CalHFA MyHome program is an example of an approved Community Seconds source in California.
How the CLTV works
| First Mortgage LTV | Community Seconds | Total CLTV | Cash Required |
|---|---|---|---|
| 97% | 3% | 100% | Closing costs only |
| 97% | 8% | 105% | $0 (closing costs covered) |
| 95% | 10% | 105% | $0 |
Terms required of the Community Seconds loan
The subordinate loan must meet specific requirements: the maturity date must be at least 5 years from the first mortgage note date (unless fully amortizing); interest cannot accrue in a way that causes the balance to grow (no negative amortization); and repayment terms must be reasonable. Monthly payments, if required, must be sufficient to cover interest due.
Key takeaways
- Community Seconds are subordinate loans from government or nonprofit sources layered on a conventional first.
- Combined LTV can reach 105% — potentially allowing zero down payment and closing costs covered.
- Eligible sources include government agencies, HUD-approved nonprofits, employers, and FHLB programs.
- CalHFA MyHome is an approved Community Seconds source in California.
- Subordinate loan must have a maturity of at least 5 years; no negative amortization allowed.
- Funding is program-specific and often limited — identify available programs early in your search.
Ready to explore your conventional loan options? Lendia can walk you through what you qualify for and find the right program for your goals.