Guest Column: SoftSecond Loan Program Makes Home Ownership a Possibility
Owning a home is a main tenet of the American Dream. However, the high cost of housing in Massachusetts makes it difficult for many families to afford a home.
The Massachusetts Housing Partnership (MHP), along with the Department of Housing and Community Development, has established the SoftSecond Loan Program to help families in certain income brackets realize their dreams. A SoftSecond Loan allows first-time home buyers to obtain low-interest mortgages in order to help finance their purchase. MHP collaborates with many banks and mortgage lenders statewide to administer the program.
The MHP developed the SoftSecond Loan Program in 1990 in response to a Federal Reserve Bank study which concluded that banks and mortgage lenders were disproportionately turning down low-income minorities for loans. Since its inception, the MHP has assisted approximately 10,000 families across the Commonwealth in purchasing their first home. To date, the program has served 315 out of Massachusetts’s 351 cities and towns and helps between 850 to 900 families a year.
To be eligible for the program, one must be a first-time home buyer; though some single parents and displaced homemakers may also be eligible. You must also be within certain income requirements depending on the town in which you want to buy a home and have less than $75,000 in total liquid household assets. Buyers must complete a homebuyer education course and a post-purchase class in order to learn how to finance their home. The classes are usually eight to ten hours long and are run by the MHP with the Community Housing and Planning Association (CHAPA).
A SoftSecond Loan offers a below market interest rate that is fixed for thirty years. The discounted rates are generally between 5.25 and 5.75 percent. SoftSecond Loans increase a homebuyer’s purchasing power by approximately 20 percent. The loan includes a low, 3 percent down payment, no private mortgage insurance requirement and a state subsidy for interest payments for qualified buyers.
Homebuyers must maintain their property purchased through the SoftSecond program as their primary residence during the duration of the loan. However, they are able to resell their home if they choose to move and must pay back some of the subsidy based on certain criteria.
The state-wide average family income for recipients of the SoftSecond Loan is approximately $47,000; however the average income varies in each town. There are income and asset tests in order to ensure that only the families that need the most help receive funding.
For first-time homebuyers that do not qualify for a SoftSecond Loan other resources available include down payment and closing cost assistance, Section 8 assistance for homeownership, community buy-down plans, employer assisted homeownership and affordable home programs.
The SoftSecond Loan Program has shown very small foreclosure and delinquency rates. It is an exemplary public-private partnership that is making a difference in the quality of life for many Massachusetts residents.
There are many lenders state-wide that participate in the SoftSecond Program. For more information, contact the MHP at 1-800-752-7131 or visit their website at www.mhp.net/homeownership.