soft second mortgage

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Paul Fredrick

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Post Posted: Fri Jun 08, 2007 2:57 pm    Post subject: soft second mortgage
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I needed some information on how the soft second mortgage program works in Massachusetts
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Post Posted: Fri Jun 08, 2007 3:21 pm    Post subject:
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Hi Paul,

Welcome to Mortgagefit discussion board.

Soft Second Loan Program helps increase homeownership opportunities for low and moderate income first time home buyers. It results in increasing purchasing capability for people by combining a conventional 1st mortgage with a publicly subsidized 2nd mortgage.

These mortgages have lower interest rate which are 1/4 to as much as 1/2% less than prevailing market rates and have low down payment requirements (only 3%) but 1.5% (a minimum of $1,500) should be from borrowers own funds. Amount of 2nd mortgage is limited to greater of 20% of purchase price of the home or $20,000.

Other things to note are that borrower's income needs to be within 80% of the area median income and the house purchased through this program is to be used as your primary residence.

In this program a 30 yr frm covers up to 77% of the home's purchase price and the 2nd mortgage covers the rest 20% with 3% down from borrower.

The "soft second" will have interest only payments for the first ten years and during this period public funds will help lower borrower's monthly housing costs depending on their income.

Do let me know if you have any other questions.

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Post Posted: Fri Jun 08, 2007 3:32 pm    Post subject:
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One thing is that if you sell your home within five years of purchasing it with the Soft Second Loan then you will have to repay the full public subsidy used up until that point.

And if the house is sold after five years then at the time of sale you will have to repay the lesser of 20% of the net appreciation gained or the subsidy used.

Miller
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Post Posted: Fri Jun 08, 2007 4:08 pm    Post subject:
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Quote:
I needed some information on how the soft second mortgage program works in Massachusetts


It is also necessary that you have less than $75,000 of total liquid assets which does not include retirement accounts like 401k, 457, 403B & IRA accounts.

You will also be expected to contribute 28 to 33% of your monthly income towards paying the first & second mortgage and other housing expenses. Subsidy to be received is calculated as the difference between the amount you can contribute towards second mortgage & the full monthly payment amount.
Fiona

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Post Posted: Fri Jun 08, 2007 7:03 pm    Post subject:
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You can read more about it from here - http://www.mass.gov/dhcd/components/housdev/want/soft2nd.htm
Icon Mini Profile ezmortgageloanz

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Post Posted: Sun Jun 10, 2007 9:20 pm    Post subject:
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I suggest that you compare/constrast the option you are considering now with a FHA + DPA grant to determine if a 1 loan-1 rate approach will provide a lower rate/payment then the blended rate/combo payment approach.

Regards,

Scott Miller

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Post Posted: Sun Jun 10, 2007 11:39 pm    Post subject: RE: Pros and cons of soft second loan
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Hi all,

Every loan program may have its pros and cons. Similarly, the soft second program, as I have understood, seems to be an option for low income buyers who can afford to make low down payment. It can also serve the purpose of those who wishes to pay lower interest on a monthly basis. These are the merits though I feel if one is a first time buyer and has low income then it is better that he avoids two mortgages at a time. He can go for only a single loan with some amount of down payment assistance.

In a way, I would go by what Scott has mentioned here – seeking a single loan probably an FHA loan as it wouldn't consider my credit score and then look for a down payment assistance. At least if I am a first time buyer, I would be confident of managing one loan at a time. But then as I said, there are pros and cons, so some people may definitely find it easier to use a soft second depending upon his income and liabilities.

Good luck! Smile

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lindsey

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Post Posted: Thu May 14, 2009 5:49 am    Post subject: credit score
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What does your credit score have to be to apply? Can the co borrower have non conditional credit?
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Post Posted: Thu May 14, 2009 9:19 am    Post subject:
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lindsey, if you are a first time homebuyer, you will probably find that your best bet is to use a program offered by your local state housing department, which exists in virtually every state in the usa. there, you'll also find these "soft second" mortgages on occasion, which would provide you with down payment and closing costs assistance. more often, the second mortgages will not be "soft" but will, instead, require you to repay at a nominal interest rate.

qualifying credit scores these days are generally considered to be 620 and up, though you may find scattered lenders who will work with lower scores. your coborrower can have what i believe you meant to read "non traditional" credit, as a general rule.

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Janice

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Post Posted: Fri May 15, 2009 9:55 am    Post subject: Soft Second
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I received a MA Soft Second mortgage in 2006. Now that it's been a few years, I probably wouldn't recommend it. First of all, they make you jump through so many hoops that it's almost not worth it. You have to take stupid first time hombuyer classes, be "certified" by the State (which meant going to the most gang-ridden part of Dorchester), beg for closing costs from the City of Boston, etc. The amount being subsidized isn't that much. I could pay it. Interest rates were a bit higher in 2006, but I've thought about getting out of this Soft Second and into a conventional mortgage. I don't relish having to repay the subsidy if/when I sell.
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Post Posted: Fri May 15, 2009 10:10 am    Post subject:
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a bitter post, janice. would you have been able to buy the house without having gone through mass housing?

it's too bad you had a sour experience. i would hope it's the exception to the rule, though. here in connecticut, it's been my experience that those who've benefited from the chfa process have been well-pleased.

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Post Posted: Mon May 18, 2009 6:38 am    Post subject:
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If you are a low to average income first time homeowner. A soft second mortgage will be usd with a publicly sponsored program allowing homeownership with relaxed mortgage terms to lower income citizens.

Eligiblity are :
1)You must be a first-time homebuyer.
2)Your income must be within the Soft Second income limits.
3)Your assets must be within the Soft Second asset limits
4)You must complete a post-purchase HomeSafe course within 1 year of closing.
5) Etc

For more information You can go through "http://www.massresources.org/pages.cfm?"

Thanks
Hari
Janice

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Post Posted: Wed May 20, 2009 9:51 am    Post subject: Soft Second
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I will receive $11K in subsidy over the first nine years, which I will have to repay in full when I sell. It makes the monthly payments a bit easier (esp. in these first five years when the subsidy is highest) but I could have bought the home without the assistance of Mass Housing. I just meant to convey that it was a lot of work and headache for a relatively small benefit.
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Post Posted: Wed May 20, 2009 9:58 am    Post subject:
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thanks for the follow-up janice. fortunately, not every program is the same - some are forgiveable, some not. as i noted, here in connecticut, the assistance is a boon to many.
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Post Posted: Thu Nov 19, 2009 10:12 pm    Post subject: Soft Second Loan
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If the buyer pays interest only on the second loan for 10 years, is that mean the principal on the second loan will stay constant for 10 years? Another words, the principal amount will not be adjusted after making payments for 10 years?

Does the home owner payback the savings if stays in the home over 10 years?

Your responses will be very helpful. Thanks.

-Voila

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