The Soft Second Loan Program is a joint initiative of the public and private sectors to increase affordable housing opportunities for low- and moderate-income homebuyers. It combines a conventional first mortgage with a subsidized second mortgage to help low- and moderate-income households to qualify for a mortgage and purchase a home for the first time.
Municipalities and regional consortia in cooperation with private sector lenders are eligible to apply for Soft Second Loan Program funds to be directed towards low-income first time homebuyers purchasing a home in their service area.
Eligible Activities and Affordability Requirements
These funds can be used to secure financing from private sector lenders for low-income first time homebuyers with reduced closing costs and down payment, as well as reduced interest payments. First-time homebuyers receiving a Soft Second Loan may earn no more than 80% of the area median income. Each participating household must complete an approved Homebuyer 101 course. Each home purchased through the Soft Second Loan program must be used as the sole primary residence of the applicant. The home must be located in a community participating in the Soft Second Loan program, and the homeowner must be able to afford the purchase price of the home.
DHCD has made $2,000,000 available for interested communities twice yearly, dependent upon the availability of funds. Individual subsidies for each eligible household vary depending on the applicants' income, but are on average about $5,800 per loan.
The Soft Second Loan Program addresses the qualification problem by breaking the total mortgage amount into a "first" and a subsidized "second" mortgage. A government subsidy loan would pay a portion of the borrower's second mortgage interest payments. Splitting the total mortgage would also allow the borrower to avoid the additional expense of private mortgage insurance.
The payments on the second mortgage are limited to interest only. Public funds may also cover a substantial portion of the interest due on the second mortgage in the early years. For the first five years, public funds may cover up to 75% of the interest payments on the second mortgage. Over the next five years the amount of subsidy gradually decreases and is phased out by year 10.
How to Apply
Twice yearly, DHCD makes Soft Second Loan program funding available through a Notice of Funding Availability (NOFA). Interested municipalities or consortia must submit a request for funding indicating the expected number of loans to be closed in the next six months, and outlining their history with the program. Interested first-time homebuyers may visit the Mass Housing Partnership Fund homepage for information on participating communities and a list of contacts.
For additional information, please contact the Soft Second staff at: (617) 573-1300.