When you’re ready to buy that first house in Massachusetts, this guide can bring you closer to the dream. Learn about mortgage rates, how to get free credit reports and prepare to apply for a loan and where first-time homebuyers can go for financial help with down payments and closing costs. If you want to refinance an existing loan, there’s help here for that, too.

1

Understanding Massachusetts Mortgage Rates

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The housing market has opened up in Massachusetts in recent years as changes in evaluating creditworthiness expand to include more buyers. While added demand for homes tends to increase house prices, it also pushes mortgage rates lower on increased competition for loans. However, Massachusetts’ foreclosure rate was still slightly higher in July than the national average.

To get an idea of the rate you can expect on a mortgage, pull your credit reports and check them for accuracy. It’s free to check your credit scores once a year through the three major credit reporting companies: Experian,TransUnion and Equifax. Credit scores are key in determining the interest rate you’ll get on a mortgage from a Massachusetts lender.

Learn more about factors driving mortgage rates.

2

First-Timer? Get Homebuying Help in Massachusetts

State-sponsored MyMassMortgage offers loan products to suit various needs of first-time homebuyers, with competitive interest rates, 30-year terms and options to borrow without mortgage insurance, which saves money for people with better-than-average-credit. Basic eligibility requirements are income-based, and you have to live in the home you buy. A separate loan program through MyMassMortgage is aimed at buyers who want to rehabilitate a house.

Financial Assistance for First-Time Buyers in Massachusetts

One of the largest obstacles to homeownership in Massachusetts is coming up with a down payment. The median home value in Massachusetts is $351,500. Some cities and towns in the state offer down payment assistance to first-time homebuyers, typically up to $5,000. MassAffordableHomes.org maintains a statewide listing of affordable single-family homes, and works with MyMassMortgage to help first-time homebuyers complete the purchase.

Here’s a list of resources for the first-time homebuyer in Massachusetts:

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Find a Housing Counselor in Massachusetts

3

Understanding Home Affordability in Massachusetts

Massachusetts’s economy and housing demand influence real estate prices as well as mortgage interest rates. Although the state’s median income of $69,160 in 2014 was 23 percent greater than the US average, state housing costs are among the highest in the nation. The 2015 Assets and Opportunity Scorecard by the Corporation for Enterprise Development ranked Massachusetts 48th of 50 states in housing affordability, with only California and Hawaii having higher housing costs.

On the plus side, Massachusetts state law requires every city and town to certify at least 10 percent of its housing stock is classified as affordable. An interactive map of affordable housing throughout the state is available here.

Massachusetts lenders generally cap the amount they’re willing to underwrite on a mortgage to 30 percent of the borrower’s gross monthly income to ensure the borrower can make the monthly payment and cover other necessary living expenses.


How Massachusetts Mortgage Rates and Home Prices Affect Monthly Payments

Metro Area Estimated Monthly Mortgage Payment* Q1 2016 (Change from Previous Year) 2015 Median Home Price 2014 2013
Barnstable Town $1,594 $339,100 (-5.10%) $362,600 $345,200 $335,100
Boston-Cambridge-Quincy $1,779 $378,500 (+1.00%) $403,900 $389,800 $375,900
Pittsfield $837 $178,100 (-0.10%) $195,700 $186,200 $183,400
Providence-New Bedford-Fall River $1,156 $245,900 (+5.40%) $248,800 $238,800 $230,800
Springfield $841 $179,000 (-2.70%) $196,400 $193,300 $189,800
Worcester $1,086 $231,100 (+1.90%) $243,800 $236,100 $231,300

Source: National Association of Realtors Q1 2016 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q1 2016 and a 30-year fixed mortgage with today’s rates.

4

Figure Out How Much You Can Borrow in Massachusetts

In Massachusetts the lending limits on an FHA mortgage are different for each county, ranging from $271,050 to $625,500 for a single-family house.

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5

Buying a Home in Massachusetts: What the Experts Know

Hilda Fernandez

Hilda Fernandez is the homeownership education manager for the Massachusetts Affordable Housing Alliance.

Jim Wilde

Jim Wilde has worked for the partnership since 1992, helping first-time homebuyers north of Boston prepare for their purchase.

What do first-time homebuyers need to do to start the mortgage lending process?

Fernandez

Take and complete a certified first-time homebuyer workshop. That will give you all the nuts and bolts you need to purchase your first home. Everyone a buyer would be working with will be introduced at the class, not to solicit business but to explain their role in the homebuying process. It’s a 12-hour program and costs $50 for the class. Classes are also offered online so you don’t have to do it in person.

If you’re a first-timer, look for lower down payment and lower interest rate products. We also partner with housing organizations throughout the state that offer monetary assistance for down payments and closing costs. All of the products have credit score limits and income guidelines.

Wilde

We try to be the first stop. We want people to come here first before they do anything because we offer a fairly comprehensive training program followed by individual meetings to establish an attack plan. We look at credit history, figure out a household budget and determine what a price would be then try to match them with the best mortgage program. Look at all of your options. Check out several different lenders and mortgage programs. Put the right team together the right realtor, lender, attorney and home inspector.

Best advice for people with credit scores on the fence? What can they do to improve their credit-worthiness to qualify for financing?

Fernandez

We do encourage people to pull their credit reports at least once a year and make sure everything is right because there’s often a lot of erroneous information on there. Improving credit scores takes time and a positive payment history. I would get serious about addressing credit scores at least six months and maybe a year before applying for a mortgage.

After completing one of our seminars, people can meet one-on-one with one of our credit counselors who look at problem areas and offer tips on how to improve your score.

Wilde

It’s really important for people to tune into what goes into your credit score. No late payments. Pay attention to your balances. About a third of your score is based on what you owe versus what is available to you. The rule of thumb is to keep your balance to less than 30 percent of what the credit limit is. There really isn’t any magic bullet. It takes a long time to build a history and going forward, you have to do the things to improve it within 3-4 months. It really involves sitting down with a credit counselor to assess each individual situation. Don’t cancel credit cards that you’ve had a long history of. If you have several years of good history with an account, keep the account open but don’t use it. Once you close it, you lose all your good credit history.

Is there adequate inventory in Massachusetts for first-time homebuyers? Are there enough houses within the price range of your average first-time homebuyer?

Fernandez

Inventory is very low. But the desire is still there and our classes fill up. People are buying what they can. Our certificates are good statewide to meet lending requirements for homeowner education, so you don’t have to stay in a major urban area.

Wilde

We’re 30 miles north of Boston and our property values are significantly less than the big city. Our area in general has much more affordable housing. But it’s all relative. It’s becoming tighter and tighter here. The average for a first-time buyer is $250,000 in our area whereas the same house would be $600,000 to $700,000 in Boston. It’s definitely a seller’s market.

6

Don’t Forget Massachusetts Closing Costs

Wherever you buy a house in Massachusetts, expect to pay another 2 percent of the loan amount in closing costs. Because this can run into several thousand dollars, check for available closing cost assistance in the locality where you buy. Contact the local housing authority in the Massachusetts city or town where you plan to live.

Average Closing Costs in the Bay State

Average Origination
Fees
$905
Average Third-Party
Fees
$851
Average Total Closing
Costs
$1,756

Source: Bankrate’s 2015 survey of closing costs.

Refinancing a Mortgage in Massachusetts

Massachusetts mortgage lenders also offer refinancing to qualified borrowers who can take advantage of lower interest rates than their current loans. This can lower your monthly payment and save thousands of dollars over the life of your mortgage.

As with a conventional 30-year mortgage in Massachusetts, it pays to shop around for the best offer on a re-fi package. Re-fi lenders in the Bay State also add closing costs, so ask about these expenses, too, while shopping around. You may find a lower rate on the re-financing, then be hit with larger closing costs than a competing lender might charge.

For a closer look at refinancing check out this MoneyGeek guide.

Other Massachusetts Mortgage Resources

Massachusetts First-Time Homebuyer

Educational resources and mortgage programs compiled by the Massachusetts Office of Housing and Economic Development.

FHA Massachusetts

First-time homebuyer lending programs specific to Massachusetts from the Federal Housing Administration.

Homeownership Assistance – Massachusetts HUD

Programs and information resources from the US Department of Housing and Urban Development specific to Massachusetts residents.

My Mass Mortgage

Find nearby homebuying seminars, learn about mortgage products in Massachusetts and other resources offered through the Massachusetts Homeownership Compact.

MassHousing Help for Homebuyers

Affordable housing and mortgage programs available through this independent, quasi-public agency. MassHousing raises money by selling bonds and lends the proceeds to low- and moderate-income homebuyers in Massachusetts.

Homebuyer Workshops Calendar

Schedule of free and low-cost seminars to aid first-time homebuyers, offered by the Boston-based Citizens Housing and Planning Association.

HAPHousing First-Time Homebuyer Education Courses

Online and in-person workshops through this non-profit organization in Springfield, MA, provide information on obstacles and financial goals, understanding credit, household money management, and individual financial planning.

Affordable Mortgage Products in Cambridge, MA

Residents of this Massachusetts city will find an array of resources to help them buy that first home.

Downpayment Assistance Program in Springfield, MA

Residents of Springfield can apply for city-backed financial assistance to help cover downpayments and closing costs. Eligibility is income-based.

Foreclosure Prevention Resources

The State Office of Consumer Affairs and Regulations provides a rundown of programs and resources to help people in financial trouble keep their homes.