The Complete Guide for First Time Home Buyers Programs in MA

If you’re a first time home buyer in Massachusetts, the world is your oyster. With its rich history, unique culture and beautiful seasons, the Bay State is truly a great place to live. And with such a stunning variety of ecosystems — mountain views, miles of coastline, bustling cities, sleepy hamlets and more — there really is something for everyone.

FHA, USDA, VA, Conventional, Jumbo — with so many loan options to choose from, it can start to feel as though you’re in over your head. It’s important to keep in mind that not all mortgages are made alike, and that certain options will likely be a better fit for your unique needs than others.

Let’s take a closer look at the loan types available to first time home buyers in MA:

A number of organizations and associations offer grants to supplement your mortgage and make it easier to afford your down payment. These include:

• The Good Neighbor Next Door initiative, funded by the U.S. Department of Housing and Urban Development (HUD), is designed to “encourage renewal of revitalization areas by providing an opportunity for law enforcement officers, firefighters, emergency medical technicians and teachers to purchase homes in these communities.” Qualified first time home buyers in MA who agree to live in the property for at least 36 months are eligible for a 50% discount off the list price of homes available in the HUD’s inventory.
• Fannie Mae’s HomePath ReadyBuyer Program was created “[break] down the home buying process into easy-to-grasp lessons online”; buyers who participate in the program are eligible for up to 3% closing cost assistance toward the purchase of a HomePath property.
• The HUD Dollar Homes initiative “helps local governments foster housing opportunities for low-to-moderate income families and address specific community needs by offering them the opportunity to purchase qualified HUD-owned homes for $1 each.”
• The National Homebuyers Fund offers Down Payment Assistance (DPA) (and/or closing cost assistance) up to 5% of the mortgage loan amount for home buyers in all 50 states.

Many states offer their own first time home buyer programs and grants; to see which ones are available in Massachusetts, contact your city or town officials or look at HUD’s list of home buying programs by state.

Once you’ve determined which loan type makes the most sense for you, the next step is to apply for mortgage pre-qualification. Although it isn’t a mandatory stage of the mortgage application process, pre-qualification can be helpful because it gives you an estimate of how much money you’re approved to borrow before you begin your house hunt and it makes a seller more likely to accept your offer.

In order to receive pre-qualification, you need to submit the following to the lender:

• Proof of income
  • Employee verification letter
  • Pay stubs from the past two months
  • IRS W-2 forms and tax returns from the past two years
• Proof of assets
  • Savings account
  • 401(k)
  • Stock dividends
  • Investment account statements
• Your tri-merge credit report
• Your debt-to-income ratio

Note that being pre-qualified does not necessarily mean that you’ve been approved for a mortgage; you’ll still need to go through the standard loan application process in order to actually secure funding. This means you aren’t obligated to work with the lender that pre-qualifies you and can, in fact, shop your pre-qualification around to other lenders to get a better deal. A mortgage broker can be an invaluable asset here because they can act as a liaison between you and lenders.

The current housing market in Massachusetts (and across the U.S.) is competitive. The median sale price in April 2022 was $584,100, which represents a 10% growth from last year. There are homes being sold quickly, for over the asking price, and a lesser number of homes being sold. This is one reason why it’s so important to have a strong and supportive real estate team.  

To streamline your search, there are a few things you should consider before you book your first viewing:

• What is your budget/how much home can you afford?
• Would you prefer to live in the city, the suburbs or somewhere more rural?
• What type of property are you looking for? (e.g. a single-family home, a duplex, condo, townhome, a co-op, etc.)
• How many bedrooms and bathrooms do you need? (Be realistic — there’s no sense in saying you need eight bedrooms when, realistically, you only need three.)
• What are your must-have features in a home, and which features would simply be nice to have?
• What is important to you? (e.g. a good school district, proximity to work, room to grow, etc.)

Keep in mind that every house hunt comes with certain trade-offs but having a clear idea of what you want will make the process easier and better set you up for success. When you start viewing homes, be sure to test the plumbing and the electric system and look for structural issues, water damage and mold. FindLaw offers a great home evaluation checklist to help you get started.

So, you’ve found a home you love and you’re ready to make an offer — now it’s time to figure out how much you’re actually willing to pay for it. List prices aren’t set in stone, and there’s room for your realtor to negotiate with sellers based on the home’s location, how long it’s been on the market and whether it requires any repairs or upgrades. You’ll want to schedule an official home inspection within a few days of submitting your initial offer; a home inspector can provide a definitive report of any pre-existing issues with the home, which you can use to renegotiate your offer — or, in the worst-case scenario, withdraw it.

If you have any questions about buying your first home in Massachusetts, contact one of our experienced mortgage brokers today.

Once you’ve submitted your final offer, you have 90 days to apply for a mortgage. At this point in the process, you’ll want to bring in your mortgage broker. Your broker will guide you throughout the mortgage application process and will act as an official liaison between you and lenders. Although it’s possible to work with your bank to apply for a home loan, mortgage brokers work with a wider variety of lenders, offer more personalized customer service, are able to leverage a broader network of connections, typically have lower overhead and are dedicated to negotiating favorable mortgage terms for you.

Once you’ve applied to your lender of choice, an underwriter will review your application to determine your ability to repay your debt based on factors such as credit score, credit history, employment history, income stability, debt-to-income ratio, assets and so on. The underwriter approval process is similar to the pre-qualification process.

Based on their findings, the underwriter will either approve, deny or suspend your application. If approved, you can move on to getting a home appraisal, which will take you one step closer to total approval. If suspended, the underwriter likely needs more information before they can proceed; it falls upon you to provide the information requested. If denied, don’t panic — the underwriter will clearly explain why your application was rejected, so you can work with your mortgage broker to resolve this issue and apply again.

Underwriters require borrowers to receive a home appraisal from a lender-approved appraiser before they issue their final mortgage application approval; this appraisal gives the lender an objective idea of the home’s value and ensures that the homeowner doesn’t over-borrow.

At this step of the process, the appraiser will review:

• Current market trends
• The general condition of the home
• Square footage
• The number of bedrooms and bathrooms
• Additional space (e.g. basement, attic, crawl space)
• Building materials
• Foundation type
• Home improvements, upgrades and added amenities
• Neighborhood characteristics
• Lot size
• Recent sales of similar properties

Once the appraisal is complete, the appraiser will submit their findings to the underwriter for final review and approval. At this point, your mortgage broker will work with the lender to lock in your interest rate prior to closing.

At long last, you’re ready to close on your new home. During closing, your broker will work with you to review and sign all loan documentation, and you’ll be responsible for paying closing costs, which could include an appraisal fee, an origination fee, legal fees, title search and insurance, escrow fees and more. How much you pay in closing costs will vary based on your mortgage option, loan amount, the type of property you purchase and its location; depending on which loan type you chose, you may be eligible for options to offset closing costs, such as monetary gifts from family and friends.

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Congratulations! It’s been a long journey, but you’re on track to finally make the transition from first time home buyer to first time homeowner. We hope this guide has been helpful and that you enjoy making your new home your own and exploring all that Massachusetts has to offer. If you have any additional questions about becoming a first time home buyer in MA, check out the FAQ below or contact Blue Water directly for more information.

Q: How much money do I need to put down on a house in Massachusetts?
A: If you qualify for a VA or USDA loan, you’re eligible to put no money down; if you qualify for a conventional loan, you can put as little as 3% down.

Q: How much is the average PMI for MA?
A: PMI or private mortgage insurance, will fluctuate based on your credit score and down payment; use a fact of 0.7% for a good ballpark. For example, on a $100,000 loan, multiply $100,000 by 0.7% for a $700 annual cost, or $58.33 a month.

Q: How can I get approved as a first time home buyer in MA?
A: The first step is to talk with an experienced loan officer who can answer all your questions and walk you through the prequalification process.

Q: Do I have to take a first time home buyer class in MA?
For some loans, such as HomeReady and HomePossible, you will be required to complete a first time home buyer.

Blue Water Mortgage is licensed in New Hampshire, Maine, Massachusetts, Connecticut, Vermont, Rhode Island, Florida, North Carolina, Colorado, Texas, Georgia, and South Carolina.