If you’ve started thinking about buying your first home in the Bay State, you might have already hit your first big roadblock: money.
Perhaps you’ve crunched the numbers and discovered a monthly house payment would be less than a rent payment. But when you pile on utilities and other expenses, there isn’t much left to save for a down payment. So unless you get an unexpected windfall of cash, it might seem to you that you’ll never get to buy a home in Massachusetts.
Hang on! Don’t stop clicking on listings just yet.
Thanks to the state’s MassHousing program, your dream of becoming a first-time homeowner could become a reality. It’s helped more than 90,000 Massachusettsans buy a home by providing affordable loans and down payment assistance. Ready to learn the details about all the Massachusetts homebuyer assistance programs? Keep reading.
What is MassHousing?
MassHousing is an independent public agency that provides homebuyers with assistance by selling bonds and lending the proceeds to low- and moderate-income homebuyers.
Massachusetts first-time homebuyers who work with the agency get their own team that includes a real estate agent, attorney, home inspector, and the experts at MassHousing. MassHousing also services their loans, meaning your monthly payments go directly to MassHousing. And local customer service agents are available should you have questions about your mortgage.
MassHousing Mortgage Loans
MassHousing’s flexible income and credit requirements help first-time homebuyers get conventional or FHA loans even when home prices are soaring.
“While it is a challenging market, MassHousing equips first-time buyers like no other lender,” says Eric Gedstad, director of marketing at MassHousing. “We have multiple mortgage loan options to meet different needs. And we provide job loss protection insurance for the borrower, that comes with their PMI (private mortgage insurance), at no additional cost to them.”
Gedstad refers to the MI Plus program, a type of mortgage payment protection. MI Plus covers the mortgage principal and interest for up to $2,000 per month (for up to six months) if the borrower is let go at work and collects unemployment.
Borrower requirements for MassHousing mortgage loans:
- Borrower must have a minimum credit score of 640.
- Borrower must complete a homebuyer education course.
- Borrower must meet MassHousing income limits.
- Borrower must work with an approved lender.
Homebuyers can choose from a single dwelling, condo, or multiunit family home.
How much you can spend on your new house varies depending on a few factors, such as whether you’re buying a single-family dwelling or a multifamily unit, the income limits for the property’s county, and conventional loan limits.
MassHousing down payment assistance programs
Whether you’re yearning to live in a charming, picturesque small town or favor the city vibes of historic Beantown, the biggest hurdle to getting the keys to your first home is coming up with a down payment.
MassHousing offers the Workforce Advantage 3.0 down payment assistance, which Massachusetts borrowers can use in every city and town in the state. In addition, the aid can often be combined with other community down payment loans.
“Our most generous down payment assistance program—up to 10% of purchase price or $50,000, whichever is less—is available in Boston, the 26 Gateway Cities, and the communities of Framingham and Randolph,” says Gedstad. “Elsewhere in the state, the max amount is lesser of 10% of purchase price, or $30,000.”
The assistance is forgivable, so you don’t have to pay for the financial aid you receive unless you refinance or sell your home. Other program perks include job loss protection for the home loan at no cost to the borrower.
If you don’t qualify for the Workforce Advantage 3.0 program, you might still qualify for up to $15,000 (or 5% of the home’s purchase price) in down payment assistance. The assistance comes in the form of a 15-year fixed-rate loan with an interest rate of 2%. The loan must be repaid when the home is sold or the loan is refinanced.
Down payment assistance income limits
Borrowers must meet MassHousing income limits unless buying in Boston or one of several other Gateway Cities, where borrowers can earn up to 135% of an area’s median income.
Income limits are determined by your salary and the number of dependents in your household.
“If somebody has four dependents, their income limit might be $90,000, while someone else’s income limit might be $70,000 because they only have one dependent,” says Denise Peach, senior vice president of mortgage banking at Total Mortgage Services in Leominster, MA.
You can choose a single dwelling, condominium, or two- to four-family-unit property. However, down payment requirements are different if you’re buying a multiunit property.
“You’ll need 3% of your own money to bring to the table for any multifamily property,” says Peach. “So if you are eligible for 5% down payment assistance, MassHousing would contribute 2% for down payment assistance.”
How to get started with MassHousing
Even if you’ve checked all the eligibility boxes for assistance, you still need to connect with an approved lender to get a mortgage pre-approval letter before you start looking at homes. A pre-approval letter essentially says you’re a serious buyer when you make an offer on a home.
Pre-approval letters are typically valid for 30 to 60 days, but might have a shorter life span when the Federal Reserve hikes interest rates.
“I tell people not to assume their pre-approval letter is good for more than three weeks because the rates are changing that much,” says Peach.
Massachusetts Housing Partnership ONE Mortgage
Another option to consider is the Massachusetts Housing Partnership, a nonprofit organization that helps first-time homebuyers with their ONE Mortgage product.
ONE Mortgage offers a 30-year fixed-rate loan for low- and moderate-income first-time homebuyers. Borrowers have to come up with a small down payment, but some communities can lighten the load with down payment assistance that can be combined with ONE Mortgage. Extra assistance is also available to help lower monthly payments, and there is no private mortgage insurance requirement for this loan.
- Borrower must have a 3% down payment for a single- or two-unit family home or condominium. A three-unit family home requires a 5% down payment.
- Borrower must have a credit score of at least 640 for a single-family home and 660 for two- and three-unit family homes.
- Borrower can’t exceed a maximum 38% debt-to-income ratio. (This rises to 43% in some cases.)
- Borrower’s assets can’t exceed $75,000. (College or retirement savings don’t count as assets.)
- Borrower must complete homebuyer education courses.
- Borrower must meet MHP income limits. (This varies by county and the number of people in your house.)
- Borrower must agree to make the property the primary residence. If you stop living on the property, you must refinance from your ONE Mortgage.
Which loan is right for me?
With so many loans and down payment assistant options available in Massachusetts, figuring out which program is right for you can be daunting.
So it’s essential to get a few quotes from an approved lender. Such lenders are well-versed in the programs and can give you the best option depending on your income, where you want to live—and whether you need an affordable fixed-interest rate loan, help with the down payment, or both.