Chenoa Fund Down Payment Assistance: How It Works and Who Qualifies

The Chenoa Fund is a nationwide down payment assistance program in the United States. Current program materials say it is not offered in New York; availability, eligibility, and terms should be confirmed with an approved lender. It is designed for buyers who qualify for a mortgage but struggle to accumulate the upfront cash for a down payment and closing costs.

What Is the Chenoa Fund?

The Chenoa Fund is a down payment assistance (DPA) program administered by CBC Mortgage Agency, an FHA-approved, federally chartered governmental agency.

The program offers secondary assistance, with repayable and forgivable options, that can cover a 3.5% FHA down payment or provide 5% assistance depending on the product. Buyers may therefore have zero out-of-pocket contribution toward the down payment itself, subject to program and lender approval.

How Chenoa Fund Works in Practice

Chenoa Fund assistance can be paired with a primary FHA loan, and current program materials also describe a conventional option. It is not a VA-loan program.

There are two primary product structures:

Repayable second mortgage:

• Assistance amount: 3.5% or 5% of the purchase price, depending on the product
• Structure: 10-year second mortgage; the current matrix sets the rate at 1 percentage point above the first-mortgage rate
• Payment: Monthly payments on the second mortgage begin immediately alongside your FHA first mortgage
• Income limit: None listed in the current program matrix, subject to other eligibility requirements
• This is the most widely available option

Forgivable second mortgage:

• Assistance amount: 3.5% or 5% of the purchase price, depending on the product
• Structure: 30-year, 0% second mortgage forgiven after 36 consecutive, on-time payments on the first mortgage
• Income limit: None listed in the current program matrix, subject to other eligibility requirements
• This can function like a grant after the stated conditions are met, though it is technically a forgivable second loan

Key Requirements

To qualify for Chenoa Fund assistance:

Program requirements: For Chenoa FHA products, current program materials list a minimum 600 credit score. DTI overlays are determined by the qualifying credit score and automated underwriting, alongside the standard FHA, employment, and property requirements.

Property: Must be a primary residence. Investment properties and second homes do not qualify.

Borrower: Residency must meet FHA and CBC Mortgage Agency requirements. Some borrowers must complete a homebuyer education course.

Lender: Must work with a Chenoa Fund-approved lender. Not all FHA lenders participate in the program.

What Chenoa Fund Does Not Cover

A critical point: Chenoa Fund assistance is directed to the down payment (3.5% or 5%, depending on the product) and does not automatically cover closing costs. Closing costs on an FHA loan typically run 2-5% of the purchase price and still need to come from somewhere.

This means buyers using Chenoa Fund should budget for:

• Closing costs: 2-5% of purchase price (still needed)
• First-year maintenance reserve: 1% of home value

Sources for closing costs with a Chenoa Fund purchase:

• Seller concessions (FHA allows up to 6% from the seller)
• Lender credits (in exchange for a slightly higher interest rate)
• Your own savings
• A separate closing cost assistance program from your city or county

The Real Cost: A Worked Example

For a $250,000 home:

Without Chenoa Fund:

• FHA down payment (3.5%): $8,750
• Closing costs (3%): $7,500
• Maintenance buffer: $2,500
• Total cash needed: $18,750

With Chenoa Fund (repayable second):

• Down payment: $0 out of pocket
• Closing costs (3%): $7,500
• Maintenance buffer: $2,500
• Total cash needed: $10,000 (plus new second mortgage obligation)

Monthly payment with Chenoa Fund:

• FHA first mortgage: ~$1,600 (6.8% rate, 30 years, ~$245,472 loan including upfront MIP)
• Chenoa second mortgage (10-year, ~$8,750 at ~7.8%): ~$105/month
• FHA monthly MIP: ~$110/month
• Total: ~$1,816/month

The Chenoa Fund reduces your upfront cash requirement but increases your monthly obligation through the second mortgage. This trade-off makes sense for buyers who have stable income but limited savings — you're essentially financing your down payment rather than saving it.

The Forgivable Version: Is It Free?

The forgivable second mortgage sounds like a grant, and functionally it can be — if you make 36 consecutive, on-time payments on the first mortgage. After those payments, the remaining balance is forgiven under the product terms.

The current program matrix lists no income limit, but borrowers still have to satisfy the program's credit, underwriting, property, and lender requirements.

The forgiveness is not instantaneous — if you sell or refinance within 36 months, you'll likely need to repay the assistance. This limits flexibility in the near term.

Chenoa Fund vs. State Housing Finance Agency Programs

State HFA programs often provide comparable assistance amounts to Chenoa Fund and may offer better terms (lower rates on the second mortgage, longer forgiveness periods), but they're geographically restricted and typically have stricter income limits.

Chenoa Fund's advantage is universality — if you're in a state where HFA programs have long waitlists, high income restrictions, or limited availability, Chenoa Fund provides an alternative that any FHA-approved lender in the program can access.

In states with robust HFA programs (like California's CalHFA, Florida's Florida Assist, or New York's SONYMA), compare those programs against Chenoa Fund before deciding. State programs sometimes offer zero-interest second mortgages or longer deferral periods.

How to Apply

1. Find a Chenoa Fund-approved lender. The CBC Mortgage Agency website maintains a lender directory. Not all mortgage brokers or banks participate.

2. Apply for an eligible mortgage through the approved lender. The Chenoa Fund assistance is processed alongside the primary mortgage application.

3. Complete homebuyer education if required. Current program materials require education for borrowers below the applicable credit-score threshold; confirm the rule for your product with the lender.

4. Review the Loan Estimate carefully. Understand the second mortgage rate, term, and monthly payment before signing. The Chenoa Fund assistance should appear clearly on your Closing Disclosure.

Is Chenoa Fund the Right Choice?

Chenoa Fund is a legitimate and useful program for buyers who have the income to sustain a mortgage payment but haven't accumulated the full down payment. It's not a shortcut around affordability — if the combined monthly payments (FHA first mortgage + second mortgage + MIP) strain your budget, the down payment wasn't actually the limiting factor.

If you're considering Chenoa Fund, assess whether you'll genuinely be better off closing now with assistance than spending 12-18 more months saving the down payment independently. For buyers in appreciating markets where prices are rising faster than their savings rate, the Chenoa Fund can be the bridge that makes ownership achievable before the target moves further out of reach.

For buyers who have time and a workable savings rate, independently accumulating the down payment (into a high-yield account, outlined in the Down Payment Savings Plan & Strategy Guide) eliminates the second mortgage obligation and leaves you with a simpler, lower monthly payment from day one.