Disadvantages of “soft second” mortgage?

Question

Hello all, I believe I qualify for a “soft second” loan (A Soft Second Loan of 20% of the purchase price up to $55,000. Up to $5,000 for Closing Costs for a total of up to $60,000.)

Anyone have personal experience with this type of funding? Seems almost too good to be true…. looking for any downsides and/or wondering if I’m missing anything.

Braden Smith · Answer

You can find more info here:  RESILIENCE SOFT SECOND (HOMEBUYERS)

LHC’s Resilience Soft Second Program was created for the 51 parishes in Louisiana impacted by the 2016 floods. The program offers first-time homebuyers a total of $60,000:  a second mortgage of 20 percent of the home’s purchase price up to $55,000, plus up to $5,000 in closing costs. If you use the home as your primary residence for 10 years, the soft second loan of 20 percent is fully forgivable.

Borrower requirements:

- Must be a first-time homebuyer (or haven’t owned a home in the past three years); a single parent who’s only owned a home with a former spouse while married; or a displaced homemaker who’s only owned a home with a spouse

- 640 minimum credit score

- Maximum 48 percent debt-to-income (DTI) ratio

- Must complete homebuyer education course

- Must meet LHC income limits (be at or below 80 percent of AMI)

Property requirements:

- Must be a single-family home, condo or townhome

- Must be in one of 51 participating parishes in Louisiana

- Must not be in a flood zone

- Must be a primary residence

- Must not exceed $314,827

Chris Seveney · Answer

Did not know they still offered those types of loans. Have not ever dealt with one, but if it seems to good to be true, just make sure to do your research on any of the downsides of them.