soft second mortgage

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I needed some information on how the soft second mortgage program works in Massachusetts

blue · Posted: Fri Jun 08, 2007 3:21 pm Post subject:

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.

Thanks
Blue

miller_st · Joined: 17 Jan 2007 Posts: 917 168.82 Dollars($)

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

carnahandavid · Joined: 21 Dec 2006 Posts: 239 58.40 Dollars($)

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You can read more about it from here - http://www.mass.gov/dhcd/components/housdev/want/soft2nd.htm

ezmortgageloanz · Posted: Sun Jun 10, 2007 9:20 pm Post subject:

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

Caron

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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