Soft Second Loan Program

Summary
The purpose of the program is to make purchasing a home more affordable by reducing the amount of the first mortgage and assisting in the repayment of the second mortgage.

Overview
This is designed to give you a basic understanding of the program. It is not intended to discuss every detail or requirement for the program. For more detailed information, please contact Greater Boston Realty. To be eligible, you must:

• Be a first-time* homebuyer
• Meet income eligibility requirements (varies depending on community and funding source - in Boston $52,400 for a household of 1-4)
• Purchase property within a participating community (over 180 communities statewide)
• Choose a home within the price limits (in Boston $150,000-condo, $165,000-single family, $220,000-two-family, $230,000-three-family)

How it Works
Qualify for a loan through a participating bank
Banks evaluate many factors including credit history, mortgage amount, personal income, debt
Banks require your "housing ratio" (percentage of your monthly income used to pay your mortgage payments plus taxes and insurance) to be no higher than 28-30%.

For Example

You have an annual income of $30,000 and want to buy a $100,000 home. With a down payment of 5%, you will need to borrow $95,000 to make the purchase. With Conventional Financing, income of $30,000 would be too low to cover the monthly payments and taxes and insurance on the property. Your "housing ratio" would be too high.

With the Soft Second Loan Program, your mortgage is broken into a first and second mortgage. In the above example, you would have $75,000 first and $20,000 second mortgages. A government subsidy would pay a portion of the borrower's second mortgage interest payments. You would also eliminate the need for private mortgage insurance. Because you are spending less on monthly payments on the first mortgage and the reduced share on the second, your "housing ratio" decreases to 28% and you would qualify for the loan.

*Generally, a buyer or buyers who have not owned a home in the past 3 years.