How Arizona DPA Forgiveness Works: 3-Year Second Lien

Arizona down payment assistance is not a grant that vests instantly — it's a forgivable second mortgage that earns forgiveness month by month. For HOME Plus, 1/36th of the assistance is forgiven every month you occupy the home, so after 36 months (three years) you owe nothing at all.

The Mechanics: A Silent Second Lien

Key Takeaway: HOME Plus assistance is recorded as a second lien against your home with no monthly payments. You never write a check for it. It simply shrinks on its own every month until it disappears at the three-year mark.

Here's what that looks like in practice:

At closing: The assistance (up to 5% of your loan amount) pays your down payment and eligible closing costs. A second lien for that amount is recorded.
Months 1–35: Each month of occupancy forgives 1/36th of the balance. No payments, no interest bills, no action required from you.
Month 36: The balance reaches zero and the lien is released. The assistance is now permanently yours.

What Triggers Repayment?

You only repay if you stop meeting the occupancy terms before forgiveness completes. The common triggers:

Selling the home before 36 months — you repay the unforgiven portion (prorated) from sale proceeds
Refinancing the first mortgage before 36 months — the unforgiven portion is typically paid through the refinance
Moving out and converting the home to a rental before the forgiveness period ends

Because the repayment is prorated, leaving at month 24 means repaying only about one-third of the original assistance — not the whole amount.

HOME Plus vs. PTHS Forgiveness

Program	Forgiveness Period	Monthly Forgiveness
HOME Plus (statewide)	3 years	1/36th per month
Pima Tucson Homebuyer's Solution	30 years	Prorated over 360 months

The 3-year versus 30-year difference is the single biggest reason many Pima County buyers still choose HOME Plus — our HOME Plus vs. PTHS comparison walks through the decision.

Why the Structure Benefits Buyers

A forgivable second lien is dramatically better than a repayable DPA loan (which some other states use). There's no added monthly obligation, so it doesn't affect your debt-to-income ratio the way a payment-bearing second would. And unlike a "soft second" that's due on sale forever, Arizona's forgiveness actually completes — quickly, in HOME Plus's case.

If you're planning a shorter stay, run the math before you commit: the DPA calculator shows your estimated assistance, and a prorated repayment schedule is easy to reason about from there.

Frequently Asked Questions

Do I make monthly payments on Arizona DPA?

No. The second lien carries no monthly payment. Forgiveness happens automatically with occupancy.

What happens if I sell my home after 3 years?

Nothing. Once the HOME Plus forgiveness period completes, the lien is released and you keep all your equity. Selling at year 4, 5, or 25 involves no DPA repayment.

Does refinancing after forgiveness affect anything?

No. After month 36 the lien is gone, so you can refinance freely. Refinancing before month 36 requires paying off the remaining unforgiven balance.

Is the forgiven amount taxable?

Tax treatment of forgiven assistance depends on your situation — consult a tax professional. Program details are available from the Arizona Industrial Development Authority.

Can repeat buyers get the same forgiveness terms?

Yes. Forgiveness terms are identical for first-time and repeat buyers — see Arizona DPA for non-first-time home buyers.

Plan Your Timeline

Tanner Cook (NMLS #2090424) and Zac Cook (NMLS #2111496) at Cornerstone First Mortgage (NMLS #173855) can show you exactly how forgiveness applies to your purchase. Take the 60-second quiz to start.