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soft second mortgage

blue's picture
blue | Joined: October 21, 2005 09:17 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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

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miller_st's picture
miller_st | Joined: January 17, 2007 04:47 pm | Posts: 0 | Location: New Jersey | 00 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

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carnahandavid's picture
carnahandavid | Joined: December 21, 2006 04:07 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

[quote:18070e83cc]I needed some information on how the soft second mortgage program works in Massachusetts[/quote:18070e83cc]

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.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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

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ezmortgageloanz's picture
ezmortgageloanz | Joined: April 6, 2007 10:25 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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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Caron's picture
Caron | Joined: July 19, 2005 08:37 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

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! :)

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

What does your credit score have to be to apply? Can the co borrower have non conditional credit?

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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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haridas_badhe's picture
haridas_badhe | Joined: May 11, 2009 06:44 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

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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savior70's picture
savior70 | Joined: March 25, 2009 05:14 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,

If the buyer is paying interest only on the second loan for 10 years, it will not reduce the principal balance on the loan. He has been paying only the interest, not the principal. But in case he had made some extra payments towards the mortgage besides paying the interest, part of the principal balance will be reduced.

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

voila, if you're going to pay interest only, then you'll only pay interest, and no principal will be paid. there would be no "adjustment" at the end of a 10 year period.

i don'5 know what you mean by your question about paying back "the savings" if the buyer stayed in the home for 10 years.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If your income exceeds 80% of the median but it's still below 100% of the median, what changes?

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

If your income exceeds 80% of the median but it's still below 100% of the median, what changes?

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

guest, it depends on the location. whatever program is run in your area will be quite specific on what can and what cannot take place. if 80% of the median income is the cutoff, then that's that. any number greater than that will obviously disqualify you.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

In my area to qualify for the program the income limit is 100% of the median. So I ado qualify. But to qualify for a subsidy the income limit is 80% of the median (I do not qualify). But I do not understand the difference in this case between the Soft Second program and the "subsidy".

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

you're probably best off contacting the agency that administers this program directly. they can certainly advise you as to the difference betwen the "subsidy" and the program itself.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi,
I purchased w/Soft Second in MA in 2006. Should I try to [url=http://www.mortgagefit.com/refinance.html]refinance[/url] out of the this loan with the inter rates being as low as they are? Will I have penalty paybacks? I feel that I'm at a disadvantage as I own a fixer upper. If something drastically goes wrong I can't get a [url=http://www.mortgagefit.com/home-equity.html]home equity loan[/url] because I have 2 mortgages on the home. I have 6.25 % interest rate on both and receive a Subsidy covering the 2nd mortage. Monthlypayment 1st is $1206 and 2nd is $53.46 with monthly assistance of $199. Thx, Natasha

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

natasha, those programs are generally far more favorable than what you'd find in refinancing, but you may find otherwise, due to the low rates at the moment. i suggest you contact your [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url] lender to determine just what it all means to you.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

So does the soft second require 12month of clean credit of 24 months?

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savior70's picture
savior70 | Joined: March 25, 2009 05:14 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Kara,

There is no specific credit requirement to qualify for the Soft Second Loan Program. However, lenders would not generally want to offer you the loan unless you have a minimum credit score of 620. Moreover, if there is a foreclosure, short sale, judgment, etc. on your credit you will have difficulty in qualifying for the loan.

To know more about the Soft Second Loan Program, you can refer to the following page:
http://www.massresources.org/pages.cfm?contentID=7&pageID=2&subpages=yes...

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

I agree, Kara, with what Savior has told you. However, you'll find that the requirements of the loan for which you are applying is probably peculiar to that particular lender. Check with them, or with your primary lender (who may have knowledge) to see if your credit history will be a negative factor.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Is there a web site to check on a daily basis the soft second rate? I hate to keep calling the loan officer for this question. I'm in Ma.
Also if the first 10 yrs is interest only can you pay extra towards the principal?

Thank you.......

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jameshogg's picture
jameshogg | Joined: December 20, 2005 02:58 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Hi Lindav,

I don't think there is any website which can help you check on a daily basis the soft second rate. You should contact your lender in this regard and take his help.

Thanks

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

You can try masshousing.com, on which you can obtain information about those programs.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

is there a minimum requirement for staying with a soft second? I got one in July of 2009 and I am looking to refinance, am i locked into any terms regarding length i have to stay with the loan?

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

The lender may not refinance your existing loan unless you have the loan for the past 8-10 months and have paid off the dues in full. Moreover, you should have equity in your property in order to get a refinance.

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gmakerley's picture
gmakerley | Joined: November 9, 2007 07:36 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

Teri, a soft [url=http://www.mortgagefit.com/second-mortgage.html]second mortgage[/url] is typically one that need not be paid back. If you [url=http://www.mortgagefit.com/refinance.html]refinance[/url], you'll be required to pay it off, unless the new first mortgage lender is agreeable to it remaining on the property [b:2596dc6c0d]and[/b:2596dc6c0d] the soft second lender is agreeable to resubordinating their lien.

You need to speak with both lenders to determine the best way to go. It may not be to your benefit if you're required to pay off that second mortgage.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

The other benefit to the soft second loan, is not having PMI. FHA PMI is currently 90-95% of the original loan amount depending on the LTV, ouch! For those with low to moderate income it is an excellent option.

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Anonymous's picture
Anonymous | Joined: June 8, 2004 01:06 am | Posts: 0 | Location: New Jersey | 00 Dollars($)

my credit score is 645 soft second requires 660 FHA requirements at least a 620 are there any alternatives for me to investigate have a condo waiting just need financing help.

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Niicss's picture
Niicss | Joined: October 3, 2005 11:54 pm | Posts: 0 | Location: New Jersey | 00 Dollars($)

Requirements won't change. You will have to improve your credit scores and then apply for such loans.

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