In the ever-changing world of mortgage lending, it is good to see something getting less complicated, instead of more complicated. Massachusetts Housing Partnership has updated their mortgage offering with what they are calling ONE Mortgage.
The old way to secure a low down-payment mortgage was with what was called a “soft second” mortgage. That second mortgage used to cover the difference between the borrower’s down payment and the 20 percent down that mortgage lenders want to see.
If a borrower was below that 20 percent threshold, they had to pay a monthly insurance to insure the lender against loss if the house was foreclosed on. (This is called PMI or MIP in FHA products.) There was also a higher interest rate for loans that required PMI. This double-ding was enough to push would-be buyers out of the market.
Now there is ONE Mortgage. Catchy name, huh?
If you make up to 100 percent of median income, you qualify. If you make 80 percent of median income, the ONE Mortgage program offers you even more assistance. However, you must qualify for the amount that you are borrowing. Since you are earning median income, in most of this area, your purchase will be under $325,000.
Try the calculator yourself. Fill in $400 a month for taxes and $15 a month for insurance. Additional debt is any monthly loan payments or revolving credit card balances.
Hit “calculate” to see whether you earn enough to borrow that much. (If not there will be an error message on top.) Once your find the right amount, you will also see your payment, based on the information you put in. You will also see the monthly subsidy on that mortgage. Sometimes the subsidy is $0.
Use the bars on the top of the results panel your payment schedule. Also, look at the comparison to a traditional low down-payment 30-year mortgage. That’s where you see the benefit of no PMI and a good competitive interest rate.
You can save hundreds of dollars a month. What’s the catch?
- You must meet the income guidelines.
- That income must meet lender standards for the amount you want to borrow. The lenders will not allow you to borrow more than is reasonable for you to be able to repay!
- You must use a lender approved by MPH.
- You must take an approved homeowner education class.