The average home value in Massachusetts is about $581K, a 9% increase from the previous year. This value exceeds the national average of $357K, making the state one of the priciest places to purchase a home in the U.S.
Actual rates vary greatly depending on the city or town. The average monthly mortgage in Massachusetts costs about $1,442, and the average real estate tax rate is 1.23%. Property tax per year is approximately $2,667.
This guide outlines the homebuying process in the state to help you find a deal that suits your financial objectives.
In Massachusetts, purchasing a home costs an average of about $581K, an increase of approximately 9% within the last year.
To qualify for a mortgage loan, applicants must comply with the lender’s requirements relating to their income level, credit score and debt-to-income ratio and also pay the down payment amount.
Purchasing a home in Massachusetts entails comparing mortgage rates, determining how much you are comfortable spending, obtaining a pre-qualification letter from the lender and signing an agreement with the seller.
Choose an Ideal Location
Your ideal home location will depend on factors like the cost of living, social amenities, culture and proximity to green areas. When researching the cheapest places to buy a house in Massachusetts, consider your lifestyle in addition to the home’s cost.
A real estate agent can help you assess your needs and find homes that meet your wants and budget. Agents can also recommend the best mortgages for your situation and offer tips to increase your chances for a mortgage loan approval.
Look for agents with the following attributes:
- A deep understanding of the local housing market to help you identify the best place to buy a home in Massachusetts.
- A wide network of other agents, brokers and home sellers.
- A track record of aggressively pursuing leads to ensure closure.
You can find the best real estate agent in Massachusetts through referrals from family and friends or by searching online.
In Massachusetts, the cost of living differs based on your city or county of residence. When selecting the best location to purchase a home, some of the factors associated with the standard of living that you need to consider include:
- Rent or mortgage rates
- Income and property taxes
- Transportation costs
- Water, electricity and other utility costs
- Food and healthcare costs
- Car insurance premiums
- Internet and cellphone services
- Child care costs
You can use MoneyGeek’s cost of living calculator to compare expenses around the state.
Although Massachusetts is an expensive state in which to live, you can still find affordable homes by selecting one of the cheaper towns or neighborhoods in the state. Affordable locations, however, may come with drawbacks. For instance, they may lack the best hospitals, shopping and other social amenities.
Some towns with affordable housing in Massachusetts include Bellingham, Hopedale and Milford.
Calculate Mortgage Rates
Mortgage loan rates vary depending on the lender, loan terms and the borrower’s profile. When comparing offers from different lenders, you may need to balance these factors to secure the right option for your situation.
Different types of mortgage loans exist in Massachusetts. These loans feature varying terms and rates, depending on the lender and the homebuyer’s gross income, credit score and other attributes.
Some of the standard mortgage loans, together with their average interest rates in Massachusetts, are as follows:
- Conventional home loans: 6.6–7.0 %
- VA loans: 5.8–6.2%
- USDA loans: 3.3%
- FHA loans: 5.5–6.2%
Each mortgage type has a unique set of requirements that you need to consider before applying. For example, VA loans are only available to active and retired military members.
MoneyGeek’s mortgage calculator can help you estimate your mortgage payments to determine the cost of homes you can afford. You can then compare mortgage options based on upfront costs, APR rates, limits and other variables to find a mortgage that best suits your needs and budget.
You may qualify for multiple mortgage loans, such as FHA and conventional loans, so explore your options. After estimating your mortgage loan needs, you can select a suitable lender within your location.
Every lender stipulates different requirements, limits and repayment terms for a mortgage loan. Specific terms of your loan will depend on the following factors:
- Income level: A high income qualifies you for higher loan limits and better repayment terms.
- Credit score: Most lenders will lower your limits and repayment terms if you have bad credit.
- Down payment: Buyers with higher down payments will typically get better APR rates and lower monthly mortgage payments.
- Debt-to-income (DTI) ratio: The lender reviews your debt-to-income ratio to estimate the amount of your income already committed to repay existing debts.
Prepare Down Payment Requirements
When buying a home, you typically need to make a down payment — the first payment against the purchase cost. Higher down payments generally result in reduced interest rates and monthly premiums and vice versa. Percentages differ based on the mortgage option you choose.
Homebuyers can pay down payments as low as 0% and as high as 20%, depending on their mortgage loan type. If you choose an FHA loan, your down payment will be at least 3.5%. Meanwhile, conventional loans require the highest down payments, 20% of the mortgage amount. VA and USDA loans both feature zero down payments.
You can get an estimate of your down payment beforehand to ensure adequate planning. Remember, mortgage options with higher amounts come with lower monthly premiums and vice versa.
In addition to meeting down payment requirements, check whether your loan has mortgage insurance requirements. Private mortgage insurance (PMI) is a policy that protects the lender if you fail to fulfill your commitment.
If you apply for a conventional loan with less than a 20% down payment, the lender will require PMI. Neither USDA, FHA, nor VA loans require mortgage insurance.
Not everyone who wants to buy a house in Massachusetts can raise a 20% down payment. Fortunately, the state offers several down payment assistance programs, including:
- MassHousing Down Payment Assistance: Offers homebuyers a maximum of $25,000 in Boston and 26 gateway cities or $15,000 in other areas.
- Boston Home Center DPA Program: First-time homebuyers can apply for a maximum of $30,000 in financial aid from the Boston Home Center to cover down payment amounts. Eligible applicants must have less than $75,000 in household assets and complete a homebuyer education course.
- U.S Department of Housing and Urban Development: Homebuyers may also take advantage of the Department of Housing and Urban Development’s programs specific to Massachusetts.
First-time homebuyer programs are also available in Massachusetts for individuals who haven’t owned a house in the state for the past three years.
Get Pre-Approved for a Mortgage
The next step after selecting a suitable lender is to seek pre-approval for a mortgage loan. Pre-approval assures the sellers you can afford their home, and many require pre-approval before showing you a property.
Know that pre-approval differs from pre-qualification. Pre-approval confirms your creditworthiness before you identify a home to purchase. Meanwhile, pre-qualification estimates the amount you can borrow as a mortgage based on your profile. Pre-qualification is not a commitment from the lender, whereas pre-approval is.
In Massachusetts, you need to provide several documents when applying for a mortgage loan, although requirements may vary slightly across lenders. These can include:
- Tax returns
- Account statements
- Pay stubs
- Proof of employment
- Social Security number
- List of current debt
- Proof of rent or mortgage payments
Depending on the lender and your situation, you may need to provide additional documentation.
Timing your pre-approval is essential, as mortgage pre-approval is typically valid for up to 90 days. Banks base pre-approval on your most recent information about debts, assets and salary and these factors can change in the span of three months.
If your pre-approval expires while you’re still figuring out how to buy a house in Massachusetts, you will need to apply a second time.
A pre-approval letter contains information about the mortgage amount you can get from a lender and indicates your financial ability to repay the mortgage.
The letter usually states:
- The loan type and maximum amount
- Repayment terms and monthly premiums
- Interest rate
You can get as many pre-approval letters as you wish. However, lenders conduct hard credit inquiries, which can negatively affect your credit score.
A pre-approval letter may remain valid for as long as 90 days. Home buyers can leverage this period to determine the suitability of lenders’ terms to their unique situation.
Conduct a Home Inspection
A home inspection provides a third-party review of your chosen property. A thorough inspection helps you understand the home’s general condition, eliminating any unexpected costs, and can help you negotiate the home’s price.
A certified home inspector can identify critical issues with your new home that you would miss and help you determine risks or cost implications associated with your intended purchase. Most home inspection professionals summarize their findings in a home inspection report that typically includes an overview of:
- Heating and cooling systems
- Basement and foundation
- Exterior and roofing
- Plumbing and electricals
- Ventilation and insulation
- Interiors, windows and doors
Ask your real estate agent to recommend a home inspector or get referrals from friends and family. The inspection cost will depend on your location within the state.
Massachusetts law requires all inspectors to have a license from the Board of Registration of Home Inspectors. There is no legal requirement for conducting home inspections in Massachusetts, although some cities in the state do. Your home inspector or real estate agent can tell you whether any specific inspection regulations apply to your area.
A home appraisal estimates its dollar value and is also known as a valuation. Mortgage lenders or brokers may request an appraisal of your potential to determine how much it is appropriate to lend you.
Appraisal in Massachusetts comprises three approaches — market, income and cost approach. A professional will evaluate the interior and exterior of your home based on these approaches and submit a report to your lender.
Close Your Mortgage Loan
If you are happy with the terms of your loan, you can proceed to closing. This is the final phase of your mortgage application, which also entails paying appraisal, document preparation and credit report charges. You may also need to pay inspection costs and any legal fees.
After you accept the mortgage loan offer, you will need to sign all the paperwork associated with the loan. Ensure you review the offer details and consult a legal professional if you encounter any confusing terms.
According to MoneyGeek, you will also need to provide the following documents within the closing timeline are:
- Homeowners insurance policy: Home insurance protects you against damage to your new property and the accidents that may occur. Some lenders will ask for this policy before closing your mortgage.
- Title insurance policy and survey: The lender requires the title insurance policy to confirm approval of your loan.
Have copies of the documents in digital format to ensure quick submission.
Aside from the down payment, several costs are associated with your mortgage loan application, including but not limited to:
- Escrow: If applicable, homebuyers pay for an escrow account set to manage their property taxes and home and private mortgage insurance.
- Credit report: Charges paid to a credit reporting bureau to obtain a borrower’s financial background and credit history.
- Appraisal fee: The amount you pay an appraiser to determine the dollar value of your potential home.
- Homeowners insurance: A policy is required to protect your home and possessions against damage and accidents.
- Title insurance premium: The cost associated with getting title insurance to cover the lender.
- Prepaid interest: The amount you pay the lender on your mortgage before the loan term starts.
- Home inspection costs: Charges associated with conducting an inspection on your new property.
After selecting an ideal location for your home, determining mortgage rates and following the application process to closing, you will be a homeowner in Massachusetts. You will be responsible for managing the funds and making timely repayments.
Note that lenders often conduct fresh credit inquiries right before closing your loan. Avoid applying for new credit cards or maxing out your cards while buying a home.
Massachusetts Homebuying Details
Although we outlined a standard home buying process that entails selecting an ideal location, comparing mortgage rates and choosing a suitable lender, you may find other steps specific to the Massachusetts housing market.
If you are still unsure of where to start, you consult a real estate agent or mortgage lender. You can also explore homeowner assistance programs to find help with your down payment.
While estimating your mortgage payment amounts in Massachusetts, consider annual property taxes, as these will be part of the long-term payments for the home. Costs vary depending on where you live within the state.
Home inspections are vital in Massachusetts since sellers are not legally bound to complete a lengthy disclosure form. A professional home inspector can help you flag significant repairs.
Home buyers may take advantage of MassHousing Down Payment Assistance, Boston Home Center DPA Program and other home assistance programs if they need help with the down payment.
Frequently Asked Questions About Buying a Home in Massachusetts
To help you with the homebuying process in Massachusetts, MoneyGeek provided answers to the following frequently asked questions.
- Zillow. "United States Home Prices & Home Values." Accessed October 20, 2022.
- Zillow. "Massachusetts Home Prices & Home Values." Accessed October 20, 2022.
- U.S. Department of Agriculture. "Single Family Housing Direct Loans in Massachusetts." Accessed October 20, 2022.
- Zillow. "Compare Today’s Mortgage Rates in Massachusetts." Accessed October 20, 2022.
- Mass.gov. "The Homebuying Process in Massachusetts." Accessed October 20, 2022.
- Realtor. "How Long is Mortgage Pre-approval Good For?." Accessed October 21, 2022.
- Mass.gov. "Appraisal Process." Accessed October 21, 2022.
- Tax-rates.org. "Massachusetts Property Rates by County." Accessed October 21, 2022.