A Home In The Bay State: Down Payment Assistance in Massachusetts

In this historic New England state, residents not only enjoy beautiful fall foliage, but also a strong economy and top-rated public schools. The state capitol of Boston, one of America’s oldest cities, is now also a thriving tech hub. Today, Massachusetts is a place where you can invest in your future.

For buyers, that’s not always good news: Massachusetts’ popularity means the state has a competitive housing market. Homes are expensive, and they sell fast. As of March 2022,  the median home price in Massachusetts was $560,000, and houses typically transfer ownership in in less than 70 days. Understandably, many buyers worry they can’t afford a mortgage in this highly desirable state.

Fortunately, Massachusetts has programs that specifically support homebuyers. Among the most popular is down payment assistance, which reduces the amount of money you need to pay out of pocket for a down payment on your home. Today in the United States, down payment assistance helps many first-time homebuyers get their foot in the door, so to speak. As Michael Stegman of Duke University, observes, “Saving for a down payment remains one of the biggest barriers to obtaining a home mortgage,” and in many cases, down payment assistance has become “the first rung on the homeownership ladder.”

When it comes to buying a home, a little research goes a long way. As Shal Shahani, of the Shahani Group told us, “The more preparation you do before your search, the better it will be.”

We researched down payment assistance programs throughout Massachusetts and collected the results here to help you understand how to use these programs.

How much do you need to buy a house in Massachusetts?

As we mentioned, Massachusetts is a highly desirable state. As of January 2022, the median listing price in the state was $665,000.

To give you some context, in January 2022, the median listing price in the United States was $375,000. That means the listing price of a home in Massachusetts is almost twice as high as the national average.

Any buyer should know their average costs, but it’s also important to remember that Massachusetts is a diverse state. It stretches from the Atlantic Ocean to upstate New York, and depending on where you want to buy, housing prices vary drastically.

Prices are typically highest in eastern Massachusetts, specifically in the Boston metro area. Both Boston and Cambridge host strong, stable housing markets, and you’ll pay top dollar to live in either city. In February 2022, for example, the median home price in Cambridge was $970,000.

Beyond the cities themselves, the Boston suburbs are also a popular location. Homes in the town of Newton, for example, regularly sold for $1.3 million in February 2022.

Buyers should be aware that the Boston suburbs also have the highest property taxes in the state. Make sure to research your desired location’s taxes before you begin to look at homes.

As you continue west through Massachusetts, prices typically become more modest. Central Massachusetts specifically hosts a number of college towns, which combine more affordable prices with the pleasures of a small community. In the town of Northampton — home to Smith College — you’ll be looking at median home prices closer to $355,000 as of February 2022.

Rural areas of Massachusetts are often the most affordable. In Oxford, for example, the median home price was around $350,000 in February 2022.

At the same time, buyers should be thoughtful about this state’s rural housing market. Massachusetts is a popular place for second homes, and some locations – like Lenox – are rural, but still fairly expensive.

The typical Massachusetts down payment

The minimum down payment for a conventional loan is 3%, but Massachusetts buyers typically offer more than that. As throughout the country, a 20% down payment will help you avoid mortgage insurance on your loan, and the more you can pay upfront, the more likely you are to get the home you want.

Let’s put that in numbers. If you want to buy an average house in Massachusetts at $548,000 using a conventional loan, then you’d need to save at least $16,440 (3% of the total price). If you wanted to hit the 20% threshold, you’d need to save up $109,600 by the time you put up an offer.

Types of down payment assistance available in Massachusetts

Both public and private down payment assistance programs are available in Massachusetts. Several programs are run through the state government, but they are not the only options.

For example, some employers — especially universities — offer their employees down payment assistance to buy a home. So make sure you research all options when you begin the homebuying process.

Some down payment assistance programs provide grants. This is money that, provided you meet certain requirements, you do not need to repay. Alternatively, you may receive a low or non-interest loan, which likely will need to be repaid, though some are forgivable if certain conditions are met. The specific conditions of any down payment assistance will depend on the program.

What about closing costs?

When buying a home, everyone thinks about the down payment. But as Kevin Vitali, who has 14 years of experience selling Massachusetts real estate, explained, “Many first-time buyers don’t account for their closing costs.”

It’s important to remember closing costs when you purchase your first home. These include all expenses you’ll need to pay as soon as you close the deal on your new home, not just the down payment.

Closing costs in Massachusetts can vary depending on your loan provider, but they will typically land between 1.5% and 4% of your total loan amount. So, if you buy a house in Massachusetts for $500,000, that amounts to between $7,500 and $20,000.

Common closing costs may include an underwriting fee, title insurance, flood determination, and more. The specific costs vary depending on your selected location. You should review these costs with your agent in advance; they’ll be outlined on your Loan Estimate, which you should receive from each lender. This way, you know you have it all covered.

Fortunately, some down payment assistance programs include support for closing costs. For example, the City of Worcester Down Payment Assistance Program provides up to $5,000 to qualified residents for both a down payment and any closing costs. The City of Springfield also provides a forgivable, zero-interest loan up to $4,000 that can be put toward a down payment or closing costs.

Make sure to research your specific program to make sure you make the best use of any money that is available to you.

How do you qualify for down payment assistance?

Qualifications for down payment assistance will depend on the specific program you choose. We’ve outlined  the requirements for some of Massachusetts’ most popular down payment assistance programs. Generally, here’s what you can expect:

Typical qualifications for down payment assistance in Massachusetts:

• You are a first-time homebuyer (or you haven’t owned a home in at least three years)
• You want to purchase a primary residence
• You have fair to good credit
• You are a part of a low-income or middle-income household
• You can pay for some portion of the down payment yourself
• You qualify for a loan from a program-approved lender
• You are willing to complete a homebuyer education course
• You are buying a home in an area (city, town, or county) where down payment assistance is available

What down payment assistance program is right for you?

Below, we’ve collected a list of down payment assistance programs available in Massachusetts. This list is not all-inclusive, but it will give you a good idea of what support you can expect as a first-time homebuyer.

Massachusetts Housing Partnership ONE Mortgage

The ONE Mortgage is a 30-year fixed-rate loan for low-income and middle-income first-time homebuyers. Through this program, you can purchase anything from a condominium to a three-family unit, including a single-family house.

Requirements:

• The home must be a primary residence
• You must meet ONE mortgage income limits
• Minimum 640 credit score for a condominium or single-family home; minimum 660 credit score for a two-family or three-family home
• 3% down payment for a condominium, single-family or two-family home; 5% down payment for a three-family home
• Assets do not exceed $75,000, not including college and retirement savings
• Maximum 38% debt-to-income ratio for most buyers
• The borrower must complete approved homebuyer education courses

MassHousing Mortgage

MassHousing offers a fixed-rate mortgage for first-time homebuyers. Your desired home must be a condominium or a single-family to a four-family home.

This program includes MI Plus, which may cover the mortgage payment in the event of a job loss. MI Plus covers payments for as long as six months, up to $2,000 per month.

Requirements:

• Meet MassHousing income limits
• Receive a loan from a MassHousing-approved mortgage lender
• Complete MassHousing-approved homebuyer education course

MassHousing Workforce Advantage 2.0

For first-time homebuyers, MassHousing’s Workforce Advantage 2.0 program provides up to $25,000 in down payment assistance. You receive a fixed-rate MassHousing Mortgage and a down payment assistance loan with zero-percent interest. The payments on the loan are deferred until you sell or transfer ownership of the home, or until you pay off or refinance the first mortgage.

Requirements:

• You are buying a condominium, single-family, or two-family home.
• You can earn up to 80 percent of your chosen area’s median income.

MassHousing Down Payment Assistance Program

MassHousing offers down payment assistance of up to $15,000 or 5% of the home’s purchase price, whichever is less (note that Boston and Gateway cities buyers may qualify for up to $25,000). This program offers a 15-year loan with a 2% interest rate.

Requirements:

• You want to buy a condo or anything from a single-family to a four-family home
• You meet MassHousing income limits

Income limits vary depending on where you want to purchase. If you want to buy in Boston or designated ‘Gateway City,’ then you can have a higher income and still receive assistance.

MassHousing Operation Welcome Home

MassHousing’s Operation Welcome Home program offers a fixed-rate mortgage to military members and veterans. In addition to the mortgage, the program offers a closing cost credit up to $2,500, which can be combined with MassHousing down payment assistance.

Applicants to this program must be a member of the National Guard or Reserves, active-duty military, veterans, or Gold Star family members and meet income limit requirements.

MassHousing Purchase and Rehabilitation Loan

This MassHousing loan allows you to finance a house and renovation costs in one mortgage. The program is nearly the same as the MassHousing Mortgage, but with support for renovations. In order to qualify, you must have minimum rehabilitation costs of $10,000. A home inspector or contractor can likely help you ballpark renovation costs.

Make the most of your home search

We hope you found this article useful as you prepare to buy your first home. If you want to learn more about down payment assistance in Massachusetts, reach out to a qualified real estate agent today.

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