Second Mortgage Assistance

The city offers two programs that combine two low-interest loans to make the purchase of a newly constructed home affordable for moderate income households. As the mortgage payment is based only on the first mortgage amount, the result is a lower monthly payment.

The Second Mortgage program structure is summarized in the cost and cash requirement example below. The 70% first mortgage loan is borrowed from a local mortgage lender and the remaining 30% is borrowed from the City of Winston-Salem, noting that payments on the second mortgage do not begin until the first mortgage is paid in full.

An alternative program is the HOME Downpayment & 2nd Mortgage program that is used with FHA, VA, & conventional loans of up to 30 years. The loan eligibility amount of up to $8,600 is based on income and family size. The 2nd mortgage is deferred and not due until the home is sold or transferred.

The city also offers a Purchase-Rehab Tandem program for the purchase of existing homes needing repair and is described in a separate brochure.

Cost & Cash Requirements

The following example reflects estimated cost for the purchase of an $80,000 home with some closing costs financed:

$80,000 Contract Salesprice
- 2,400 Less 3% Downpayment
$77,600 Subtotal - Loan Amount
+ 1,000 Closing Costs
$78,600 Total Loan Amount

x 70% = $55,000 1st mortgage for 15 years
x 30% = $23,600 2nd mortgage for 5 years

$510 Principal & Interest
+ 90 Escrow for taxes and insurance
$600 Total estimated payment

*Based on 7.5 % interest rate, rates may vary.

$2,400 Required 3% Downpayment
+ 1,000 Required Closing Costs
+ 300 Fees to 1st mortage lender
$3,700 Total minimum cash needed

Eligiblity, Application Information
Basic Eligibility Requirements

• Be a first-time home buyer (not owned a home for three preceding years)
• Have stable, verifiable income
• Provide evidence that you have or can obtain funds required for downpayment and closing costs
• Be a reasonable credit risk with the financial ability to obtain a mortgage loan

Application Procedure

All applicants must be pre-screened by the Housing / Neighborhood Development department. Appointments can be made by calling 727-8597, and applicants must bring the following information to their scheduled appointment:

• Current Check Stub
• Federal tax forms: prior 3 years
• Prior year W-2 Form(s)
• Bank/CU Statement(s)
• List of monthly bills, balances

Eligible Areas

Second Mortgage or HOME loans are for purchase of new construction homes in revitalization areas and city-assisted subdivisions.