Veseth Poy wants to own a home someday. A native of Cambodia, he came to Massachusetts in 1985, lived with relatives in Amherst, attended the University of Massachusetts and moved to the Boston area in 1999 to find a job. Today, he works in the health care industry, is married with a young child and rents an apartment in Lynn.
Poy's story is typical of many in Greater Boston. He has a good job but can't yet afford to buy a home. While he saves, he has taken homebuyer education courses and is learning about mortgage programs like the SoftSecond Loan Program for first-time homebuyers.
Homebuyer courses are offered all over Greater Boston and enrolling in one is the first step in qualifying for mortgage programs like SoftSecond, the state's most successful first-time homebuyer program. Created in 1990, SoftSecond has helped over 8,700 low and moderate-income first-time homebuyers purchase their first home.
SoftSecond has had the most success in Boston, having helped over 3,200 households purchase their first home. In 2005, SoftSecond helped 851 families purchase their first home in 2005, 291 in the City of Boston.
This article explains more about the SoftSecond Loan Program.
How does SoftSecond work?
Soft Second combines a conventional first mortgage from a bank with a state subsidized second bank mortgage. The state subsidizes interest payments on the second mortgage for the first nine years and the borrower pays interest after 10 years, but makes no principal payments until the 11th year.
Typically, a first-time homebuyer making $45,000 could afford a home priced at $155,000 with a conventional mortgage and would pay $1,237 per month. With a Soft Second loan, the same homeowner could afford $195,000 and would pay only $1,228 per month. Splitting the total mortgage also allows the borrower to avoid the additional expense of private mortgage insurance, which is generally required when the loan exceeds 80 percent of the property value.
Has the program worked for homeowners?
Yes. While predatory and out-of-state lenders offering zero-down and adjustable mortgages have reportedly sparked a rise in foreclosure rates, SoftSecond has been able to maintain its history of low foreclosure rates. In 2005, SoftSecond reported just one foreclosure. It's the second straight year that the program has had one foreclosure and the program has experienced just 28 foreclosures in its history.
"SoftSecond is based on the premise that increasing homeownership among lower-income and minority home-buyers isn't just about making more loans today, it's about making loans that new homeowners are able to pay year after year," says Clark Ziegler, executive director of the Massachusetts Housing Partnership, which helped create and now administers the program.
Unlike zero-down payment and other so-called predatory loan products, SoftSecond requires a three-percent down payment and homebuyers must take homebuyer classes. That's a major reason why delinquent payment and foreclosure rates are significantly lower for SoftSecond loans than other targeted loan programs.
Who is eligible for the program?
To participate in the program, you must meet the following guidelines:
You must be a first-time homebuyer. This means you haven't owned a home in the three years prior to applying for the SoftSecond Loan Program. If you have owned a home with a former spouse, are a single parent, or owned a home without a foundation you may also be considered a first-time homebuyer.
You must complete an accepted first-time homebuyer education course. Ask MHP for a list of acceptable courses in your area or view the list on the website at www.mhp.net/homeownership/softsecond.php.
Your total household income and assets must be within Program limits. Limits vary by community. Ask MHP for a list of current income limits or view the list on the website at www.mhp.net/homeownership/softsecond.php
You must agree to use the property you purchase through the SoftSecond(TM) Loan Program as your primary residence throughout the term of your loan.
You must choose a home in a participating community with an established subsidy source. Ask MHP for a list of currently participating communities or view the list on our website at www.mhp.net/homeownership/softsecond.php
Allowable purchase prices are based on affordability. Limits may vary by community. Ask MHP for a list of current purchase price guidelines or view the list at www.mhp.net/homeownership/softsecond.php.
For more information, call the Massachusetts Housing Partnership at 1-800-752-7131.
Created in 1990, SoftSecond has helped more than 8,700 low and moderate-income first-time homebuyers purchase a home. The program has had success in and around the greater Boston area, aiding 851 families in buying their first home in 2005.
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