Disadvantages of “soft second” mortgage?

[Renee Williams]

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]

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