With the economy stalling from 2007 – 2009 and beyond, and individual incomes also at a stand still, or in some cases even dropping due to layoffs and the need for individuals to accept lower paying jobs simply to be employed, the American dream of homeownership has seemed a dream impossible to realize. For many prospective first time home buyers in Massachusetts, it was at best a hope for the future, and for many a frustrating nightmare. Banks were tightening qualification requirements, and money saved was being used simply to survive. Enter special programs like the Soft Second Loan program, Operation  Welcome Home, and other special offerings from MassHousing, and now individuals seeking a way to buy their first home are finding success in Massachusetts.
How Can I Avoid a Big Down Payment?
One of the biggest challenges for first time homebuyers is saving the down payment. As most discover, not only is it the first step in buying a home, but it makes the entire process easier. A healthy down payment can keep your payments low because you’ll avoid private mortgage insurance, and lower the overall cost for the closing, while also saving you money in the long run because you’ll be paying less interest during the life of the loan.
The Soft Second option works via the use of two separate mortgages; a traditional first, and a “not-so-traditional” second mortgage. This arrangement is similar to the 80/20 mortgages of the mortgage boom years, but with a slight difference. You, as the buyer, obtain a 30 year fixed mortgage as a first. The loan-to-value (LTV) on that first mortgage can be as high as 77% of the purchase price. Then a soft second mortgage is obtained. This second mortgage covers 20% of the purchase price. This allows for just 3% down (half of which can be a gift), which results in no need for private mortgage insurance (PMI). Best of all, payments on this second mortgage are interest only for the first 10 years. Some lower income individuals are also able to receive subsidies on those interest-only payments, up to 75% of the payment amount for the first five years, with a declining share after that time.
There are household income limitations on the Soft Second Loan Program dictated by the median income of the area in which the home is being purchased. Qualifying individuals must be first time homebuyers, live in the home as their primary residence, complete a homebuyer education program prior to the purchase, and participate in a home safety program within a year of the closing. If you qualify for this program, your overall costs for homeownership will be reduced, and with the lower down payment, you’ll get to that closing a lot faster.
How Can People Who Have Experienced Job Loss Afford a Home in MA?
The MassHousing Mortgage is for first time homebuyers whose household income does not exceed a specific percentage of the median income within the proposed community/county. Products offered are competitive fixed rate mortgages, with various rate lock options, and require as little as 3% down. There are loan limitations based on housing type (visit the MassHousing site for up to date limits), but the program includes multi-family dwellings, and even provides options for those with limited credit history. There are also multiple products with and without mortgage insurance, and the aforementioned “MI Plus” product that offers coverage if the homeowner loses their job. With MI Plus, in the event of a qualified job loss, payments up to $2,000 will be made for up to six months, to assist with paying the mortgage. For all of these products, standard ratio and other lender specific underwriting qualifications must be met. But as with the Soft Second program, MI Plus and the other MassHousing Mortgage products allow for a smaller down payment and can offer added protection for someone starting out in their career.
What Low-to-No Down Payment Options Are Available for Eligible Veterans?
At the end of 2015, Mass Housing introduced its new Operation Welcome Home Program. The program is an effort to make homeownership a reality for those who have put their lives on the line for our country. Operation Welcome Home requires no money down for single family and condo dwellings, and as little as 3% down for 2 and 3 unit dwellings. Gift funds are allowed for that 3% down amount. There are also rehabilitation funds available, which can make buying a “fixer-upper” a way to purchase a larger home for a lower price. The secret to this program is the 97% first mortgage combined with a 3% second that carries a zero percent interest rate. As the buyer, you’ll get a no-money down opportunity very similar to the VA program. The difference is VA loans can be more complicated to use with condos, and some other non-traditional properties. Operation Welcome Home makes home ownership a reality for qualifying veterans. Qualifying veterans include: Veterans who have served honorably; active duty military; members of either the Reserves or the National Guard; and/or members of a Gold Star Family.
There are numerous programs available in Massachusetts for first time home buyers. Most follow similar specific household income limitations based on median income levels for the county where the property is located. Low down payments, fixed rates, low or no closing costs, and reduced fees can make the difference for many in becoming a home owner. Homeownership is a dream for many, but with a bit of research, it can also be a reality.
2 Point Highlight
Low down payments, fixed rates, and low or no closing costs and fees can make the difference for many in becoming a home owner.
Operation Welcome Home can make home ownership a reality for qualifying veterans and their families.
