Loan program for home buyers in area expanded

Would-be home buyers in this area who fear they have been priced out of the market, take heart: A program designed to help moderate-income buyers has been expanded to cover more communities statewide, including a dozen new ones in this region.

The nonprofit Massachusetts Housing Partnership has also stretched the income guidelines for its SoftSecond Loan Program, allowing more people to qualify for coverage.

Coupled with the softening real estate market today, the program, which has benefited nearly 10,000 home buyers in Massachusetts, gives people more hope -- and leverage -- than ever before in hunting for a home.

Home sales were down 24 percent and prices fell 5.3 percent in September. The median price for a home in Massachusetts was $341,000, down from $359,900 a year earlier. Prices have dropped or been flat for eight straight months, and sales were slowest in that month for a decade.

The SoftSecond program combines a conventional first mortgage with a state-subsidized second bank mortgage, according to the housing partnership. The state subsidizes interest payments on the second mortgage for the first nine years. The borrower pays interest after that but makes no principal payments until the 11th year.

The program significantly increases a person's buying power.

For instance, a first-time home buyer earning $45,000 could afford a home priced at about $155,000 with a conventional mortgage. The mortgage payment would be about $1,237 a month on a 30-year mortgage.

By picking up the interest payments on the second mortage, the SoftSecond program allows a buyer to purchase a $195,000 home, with a payment of $1,228 a month, according to the partnership.

Income guidelines vary from town to town, but in the newly added communities a household of four can earn up to $73,600 and still qualify in Avon, Bridgewater, Plympton, and West Bridgewater ; and up to $84,100 in Canton, Cohasset, Foxborough, Milton, Norwell, Sharon, Stoughton, and Westwood .

The borrower also avoids paying private mortgage insurance, which can cost as much as 0.5 percent of the mortgage. Buyers must take a home-buyer class, which reduces delinquent payments and foreclosure rates, according to the organization.

David Wluka, president of the Massachusetts Association of Realtors, called soft second programs such as the one offered by the housing partnership especially useful for younger buyers who had not been able to save up a large downpayment.

"It's very useful," said Wluka, a Sharon real estate agent, noting that it helps buyers avoid paying the extra cost of mortgage insurance. However, because such programs can be complicated, "for those at the low- and moderate-income level, it can take considerable counseling before they understand what is happening."

Matt Carroll can be reached at mcarroll@globe.com.