Is the Chenoa Fund Worth It for a First-Time Buyer?
By Joe Nelson, Retired Air Force, Nelson Home Group Team Leader and Mortgage Loan Originator
The Chenoa Fund is worth it when it is the difference between buying and not buying, you plan to stay at least three years, you will never be late on a payment, and you have compared the first-mortgage rate with and without it. It is a second loan of 3.5% or 5% of the lower of price or appraised value, paired only with FHA loans, with no income limit and a 600 minimum credit score. The forgivable version carries no interest and no payment; after 36 consecutive on-time first-mortgage payments you request forgiveness and pay a lien-release processing fee, and the balance goes away. The repayable version is a ten-year second mortgage at 1% above your first-mortgage rate. Either way, the assistance is paid for through the price of your first mortgage, and CBC Mortgage Agency says so on its own site. This is the fourth post in our Kansas City down payment assistance series, which compares every Missouri and Kansas program side by side.
Every Missouri and Kansas program side by side, with the limits in one table: get the free Kansas City First-Time Home Buyer Guide.
What is the Chenoa Fund?
A national down payment assistance program run by CBC Mortgage Agency. The Seller Guide describes CBCMA as a subdivision of Cedar Band Corporation, a federal corporation created through the Bureau of Indian Affairs for the Cedar Band of Paiutes, and authorized as an arm of the Band’s government. That government status is what lets the assistance cover your entire minimum down payment: the guide requires every first mortgage paired with it to follow HUD Handbook 4000.1’s rules for secondary financing from a governmental entity. The program itself is a subordinate loan behind an FHA first mortgage:
“Chenoa Fund® down payment assistance (DPA) is a subordinate mortgage loan program, paired with FHA first mortgages. The DPA amount is 3.5% or 5% of the purchase price or appraised value of the home, whichever is lower.” (CBC Mortgage Agency Correspondent Seller Guide, version 12.32, August 6, 2026, p. 18)
When the appraisal comes in at or above the price, the 3.5% option covers the FHA minimum down payment exactly and the 5% option adds 1.5% toward closing costs. An appraisal below the price changes the cash you need. There is no conventional Chenoa product in the current guide, and the guide states that secondary financing is not allowed with USDA loans.
What is the difference between Chenoa forgivable and repayable?
The repayable Chenoa second carries a monthly payment for ten years at 1% above the first-mortgage rate, per the Seller Guide.
The forgivable version has no interest and no payment, and after 36 consecutive on-time payments you can request forgiveness, pay the lien-release fee, and it goes away. The repayable version is a real second mortgage with a monthly payment for ten years.
| Forgivable second | Repayable second | |
|---|---|---|
| Interest rate | 0% | 1% above your first-mortgage rate |
| Monthly payment | None | Yes, for 10 years |
| Term | 30 years | 10 years |
| Forgiveness | Eligible after 36 consecutive on-time first-mortgage payments; borrower must request it and pay a lien-release processing fee | Never; you pay it off |
| A late payment | Resets the 36-payment count | No effect on the term |
| Sell or refinance before forgiveness | Full balance due | Balance due |
Source note: CBC Mortgage Agency Correspondent Seller Guide v12.32 (August 6, 2026), p. 19; consumer qualification page modified March 17, 2026.
The guide’s own wording on the forgiveness rule and the reset:
“Forgiven once the Borrower makes thirty-six (36) consecutive, on-time payments on the FHA first mortgage. (The Borrower must request forgiveness once forgiveness conditions are met and provide payment for processing the lien release.)” and “This forgiveness period resets if the borrower makes a late payment on the first mortgage.” (Seller Guide v12.32, p. 19)
And on the repayable version:
“The repayable secondary financing has a 10-year term with an interest rate 1% higher than the interest rate on the first mortgage.” (Seller Guide v12.32, p. 19)
Miss that detail and you have signed up for a second house payment you did not expect.
Can you refinance with a Chenoa Fund second loan?
The Seller Guide says a refinance in the first 36 payments can permanently end the forgivable status if state law lets the second subordinate without CBCMA consent.
Before forgiveness, plan on repaying it. And in one case a refinance ends the forgivable status permanently:
“This loan permanently loses its forgivable status if, during the initial thirty-six (36) payments on the first mortgage, the borrower refinances the first mortgage and state law allows the second mortgage to subordinate without prior consent from CBCMA.” (Seller Guide v12.32, p. 19)
Plain version: do not plan to refinance in the first three years. If rates drop in year two, the forgivable second either gets paid off or stops being forgivable.
Who qualifies for the Chenoa Fund?
Anyone getting an FHA loan with a middle credit score of at least 600 and a file that passes FHA and CBC Mortgage Agency underwriting. No income limit. No first-time-buyer rule. From the guide: “All FHA: There are no income limitations.” and “All FHA: 600 credit score. Use the lowest middle credit score on the loan.” (Seller Guide v12.32, pp. 21 to 22). Homebuyer education is required at scores of 600 to 639, with a counseling course through Money Management International at 600 to 619 (p. 22). The borrower’s own contribution can be zero: “All funds needed to complete the transaction can come from a CBCMA-approved second lien.” (p. 26). Two units maximum. Not offered in New York.
What rules people out: you want a conventional loan (here is how sellers compare FHA and conventional offers), you might be late on a payment in the first three years, or you plan to sell or refinance inside that window. If you are wondering whether an FHA offer can still win, read an FHA buyer’s multiple-offer example in Belton.
Where does the cost of the Chenoa Fund actually sit?
In your first-mortgage rate. The guide describes the mechanism for lenders:
“The Chenoa Fund loan is subordinate in priority to the first mortgage, which is sold to CBCMA. The Seller receives a yield spread premium and is reimbursed by CBCMA for the second mortgage.” (Seller Guide v12.32, p. 18)
A yield spread premium is money a lender earns for delivering a loan at a higher rate. CBC Mortgage Agency tells borrowers the same thing in plain English on its own site:
“The terms of your first mortgage can be impacted if you don’t have your own down payment. It is possible that the interest rate on your first mortgage will be higher than if you provided your own down payment … if you qualify for a forgivable second mortgage, but you plan to be in your home more than 5-7 years, the additional interest you are charged on your first mortgage may exceed the amount of the forgivable second mortgage you are receiving.” (“Is Down Payment Assistance Right for Me?”, chenoafund.org, modified June 17, 2024)
That is the provider telling you the math can go against you. The money is real. So is the bill. It can show up in your first-mortgage rate, so ask what your rate and total costs would be without the assistance before you sign.
How does the Chenoa Fund compare with Essex?
The repayable Chenoa second runs one point above your first-mortgage rate; Essex’s runs two points above, and the forgiveness tests differ. Essex Mortgage’s National Homebuyers Fund product is the other lender-delivered program our mortgage team uses, and it is the closer comparison than any state program. Both work anywhere in Kansas and Missouri, which is why they matter in Johnson County, where the Kansas state program is excluded.
| Chenoa Fund | Essex / National Homebuyers Fund | |
|---|---|---|
| First mortgage | FHA only | FHA only |
| Amount | 3.5% or 5% of the lower of price or value | Forgivable: 3.5%. Repayable: 3.5% or 5% |
| Forgivable terms | 0%, no payment, eligible after 36 consecutive on-time payments; borrower requests release and pays a processing fee; late payment resets | 0%, no payment, forgiven at year 3 if you still occupy and have not sold or refinanced |
| Repayable terms | 10 years at 1% above the first rate | 10 years at 2% above the first rate |
| Credit minimum | 600 | 600 |
| Income limit | None | None |
| Homebuyer education | Required at 600 to 639 | Required for at least one occupying borrower |
Source note: CBCMA Seller Guide v12.32 (August 6, 2026); Essex/NHF Forgivable and 10-Year Amortized term sheets revised July 28, 2026, available through Essex Mortgage’s resources page. Pricing on the first mortgage sits on lender rate sheets and changes daily.
When is the Chenoa Fund worth it?
CBC Mortgage Agency warns on its own site that the extra first-mortgage interest can exceed the forgivable amount for owners who stay more than five to seven years.
Run the year-four test. If you sell in year four on the Chenoa forgivable second, you owe no assistance balance, provided you never missed a payment and requested the release after payment 36; the first mortgage pays off like any other. If you sell in year four on the repayable second, you owe the remaining balance. If you sell in year four with MHDC assistance in Missouri, you repay all 4%, because nothing has forgiven yet. On the three-year clock alone, Chenoa and Essex beat the state programs for a buyer who may move. The trade is the first-mortgage rate, and that trade only makes sense if the assistance is the difference between owning and not owning. Price the loan both ways before you sign. Friday’s post covers the other way to skip the second loan entirely: a USDA loan with no down payment at all.
Frequently Asked Questions
Is the Chenoa Fund a grant?
No. It is a second mortgage recorded behind your FHA first mortgage. The forgivable version carries 0% interest and no payment and is eligible for forgiveness after 36 consecutive on-time first-mortgage payments. The repayable version is a ten-year loan at 1% above your first-mortgage rate with a monthly payment. Both are liens on the house until released.
What credit score do you need for the Chenoa Fund?
A middle credit score of at least 600 on an FHA loan, per CBC Mortgage Agency’s Seller Guide. Borrowers with scores of 600 to 639 must complete homebuyer education, and scores of 600 to 619 require a counseling course through Money Management International. There is no income limit and no first-time-buyer requirement.
What happens if I make a late payment with the Chenoa Fund?
The forgiveness clock resets. The Seller Guide states that the forgiveness period “resets if the borrower makes a late payment on the first mortgage,” so one late payment in month 30 means starting the 36-payment count over. If you sell or refinance before forgiveness, the full balance is due.
Does the Chenoa Fund raise your interest rate?
It can. CBC Mortgage Agency’s own borrower page says “it is possible that the interest rate on your first mortgage will be higher than if you provided your own down payment,” and its lender guide describes a yield spread premium on the first mortgage. Ask your loan officer what your rate would be without the assistance and compare the two over the years you expect to own.
Is the Chenoa Fund available in Kansas and Missouri?
Yes. Chenoa Fund is a national program offered in every state except New York, so it works on both sides of the Kansas City state line, including Johnson County, where the Kansas state program is excluded. It requires an FHA first mortgage through a lender approved by CBC Mortgage Agency; our mortgage team originates these.
Ready to Talk?
If you are looking at Chenoa or Essex, we will price your FHA loan with and without the assistance so you can see the real trade before you commit to it.
Call or text: (816) 680-6624
KW KC North Office: (816) 452-4200
Email: [email protected]
Web: https://nelsonhomegroupkc.com/
Joe Nelson, NMLS #2547018. LeaderOne Financial Corp, NMLS #12007. Equal Housing Lender.