Your Guide to Buying a Home in Massachusetts

Your Massachusetts Buying Guide 

• By law, attorneys must be present during the closing period. The attorney will need to take an active role throughout the entire process. 
• For most transactions there will be an attorney-review period. 
• The seller and the buyer will complete the transaction together at the same table. The keys to the home, the property title, and closing fees will all be exchanged at the same time. 
• There are unique environmental factors in Massachusetts, including old heating tanks that need to be decommissioned and verified. 

Phase 1: Massachusetts Attorney Review and Negotiations

When you find a house and come to terms on a purchase price, these are the steps for finalizing the sale in Massachusetts…

1. A contract will be signed by both the buyer and seller. 
2. This launches a 72-hour review period. During this time, changes may be made to the contract and either party can walk away from the agreement. 
3. In most purchases, a “good faith deposit” is made by the buyer. This cash is held in escrow and will only be given to the seller if the buyer walks from the deal without a valid reason. 
4. The remaining funds are paid in the time that is agreed upon in the contract. 
5. Most buyers will perform inspection on the property. These need to be completed by a certain date, called the “inspection contingency date.” In Massachusetts, inspections may include general inspections, termite and pest inspections, and mold inspections. Usually a general inspection is completed first, then more detailed inspections are completed if anything is revealed. 
6. Homebuyers in Massachusetts may need to get certification of a buried oil tank. These tanks were commonly used in the New England and North Atlantic region, but they are now major environmental hazards. The Massachusetts government generally recommends removing this hazards if at all possible, but it is not required.  
7. Well testing may not be required, but it is strongly recommended. Testing is often a condition of the sale. 
8. A survey of the property will need to ensure the home is not at a high risk of flood damage. 
9. Massachusetts also requires a certificate of occupancy. This proves the property can be lived in safely.
10. Based on all of the above inspections and certifications, buyers can request changes to the contract or ask that any issues be fixed before buying. The seller can accept or deny the requests, or (more commonly) they can offer a negotiated, compromised solution. Negotiations continue until an agreement is reached. 
11. The buyer now removes the inspection contingency and the purchase can move forward. 
12. Assuming the buyer is using a loan, they will need to complete the application and approval process. 

Phase 2: Qualifying for a Loan in Massachusetts

Most buyers in Massachusetts, as well as the country, will need a loan to purchase the home. While straightforward, the process can take a long time, so it’s best to start early, ensuring the lender has all the right documentation. 

The process for getting a home loan in Massachusetts looks like this: 

1. You will submit a loan application to your lender. This is usually done with the help of an agent or broker, but you can complete the application independently. 
2. Within three days, your lender should issue a “good faith estimate.” This is simply a statement of their intention to fund your loan and help you make the purchase of your Massachusetts home. This will include an estimate of your final closing costs. 
3. The lender will eventually need a variety of financial and credit information to support your application. Remember, the more information you can provide, the better your chances of having the loan accepted. Common documents include: 

• Pay stubs, including contact information for your employer.
• Tax returns for at least the past two years. These will need to be released to the lender through an authorization with the IRS. 
• Information on outstanding loans and your current debt load
• Statements from bank accounts for at least the past two months. 
• Any and all information related to your financial situation, including payments you make or receive. This may include alimony, child support, legal judgements, bankruptcies, and divorce settlements.
• Information on large deposits outside of your normal income. In certain situations, borrowers are given large amounts from friends or family, which can be either gifts or loans. The lender needs to know the nature of these deposits and may require a “gift letter,” which is a statement on the deposit itself. 
• Information or explanation of recent credit inquiries. (Outside of your mortgage-related inquiries.) 
• Finally, the lender may require repeat or updated information on any of the above. Remember that this is only to verify your information and ensure everything is accurate. It may create an additional hassle, but providing this information will increase your chances of mortgage approval.
  

4. Using the above information (and more, if required), the lender will come to a decision on your application. 

5. Assuming you are approved, the lender will issue a “loan commitment letter.” This will include requirements and conditions, including an appraisal of the property.  

6. If you do not receive this letter in time, you can request an extension to the loan contingency date. You’ll need to submit this request in writing. The seller can deny the request, although most reasonable sellers will accept a legitimate extension.

7. Before the loan is finalized, an appraisal will be completed. If the appraisal comes back as expected, the loan will move forward. However, if the appraisal is low, changes to the contract or the loan terms may be required. This could include a lower purchase price or a larger downpayment. 

8. If everything is finalized, homeowners insurance will need to be ordered. If insurance is already provided by an HOA, proof of this insurance will need to be given to the lending company. 

This process seems complicated. However, if you start early, you will have a much easier application process. Remember, you can complete Phase 1 and Phase 2 at the same time. Avoid changes to your financial situation during Phase 2, as they can disrupt your application. This means no changes in jobs, no new debt, and no new credit cards. 

Phase 3: Closing the Purchase in Tennessee

The closing will take place at a single table with all parties present at the same time. 

1. Title search: Research of the title will be completed to make sure there are no complications or issues with ownership. If the title is clear, the process can proceed as planned. 
2. The attorney representing the buyer will prepare paperwork for completing the title and deed change. Title insurance will be issued, and a final closing will be scheduled.
3. The final cash figure for the buyer is calculated. This usually needs to be brought in the form of a cashier’s check. 
4. A final walkthrough is performed to ensure the home is still in high quality and has not been damaged since last being seen. 
5. All documents will be signed by the buyer, seller, and attorney. 
6. The buyer will pay their remaining funds for the downpayment. 
7. The transaction will then be recorded with the city or county. 
8. You’ll receive your keys and can move into your new home!

Massachusetts Conforming Loan Limits

Limits for conforming loans are set by the Federal Housing Finance Agency, which determines limits for government-supported loans on a county-by-county basis. In Massachusetts, most of the 14 counties fall under the base limits for the entire country. These counties, which are mostly in central and western Massachusetts, have a single-family conforming loan limit of $548,250. 

For a duplex, the limit is $702,000, while a three-unit property has a limit of $848,500. If you want to purchase a four-unit property in a base-limit Massachusetts county, the limit is $1,054,500 if you use a conforming loan. 

Seven counties in Massachusetts have higher loan limits because the cost of housing is larger in these areas. In Essex, Middlesex, Norfolk, Suffolk, and Plymouth counties, the limit for a single-family home is $724,500. The other limits are $927,500 (two-unit), $1,121,150 (three-unit), and $1,393,300 (four-unit).

Two counties, the islands off Massachusetts, have higher limits still. In Nantucket county and Dukes county, home of Martha’s Vineyard, the limit for a single-family home is $822,375 and $1,053,000 for a two-unit property. A three-unit has a limit of $1,272,750, while the limit for a four-unit is $1,581,750.

Remember, these are only the limits for conforming loans. If you need higher amounts, there are options such as jumbo loans for Massachusetts property. 

Downpayment Assistance Programs in Massachusetts

Homes in Massachusetts are among the most expensive in the entire country. This makes saving for even a small downpayment extremely difficult. For example, a 5% downpayment on a $600,000 home, which is a fairly typical price in Massachusetts, would be $30,000.

It can be difficult to save for a downpayment, but there are numerous downpayment assistance (DPA) programs in the state.

State DPA Programs for Massachusetts Homebuyers

MassHousing
A “quasi-public” housing agency, MassHousing uses bonds and lending to support its mission of affordable housing for all Massachusetts residents. Through this program, homebuyers can receive up to $50,000 towards a downpayment.

MassHousing divides their DPA program into two categories. The first is an option available for eligible buyers in any Massachusetts city. This provides up to $30,000 in financial support.

The second is available to buyers in 28 select cities. This option provides up to $50,000 in support for your purchase, which would equal a 10% downpayment on a $500,000 purchase!

Major Local Programs in Massachusetts

Boston’s First-Time Homebuyer Program
As Massachusetts’ largest city, state capital, and overall economic hub, Boston offers a variety of services, including one of the most generous city-funded programs in the nation. Residents of Boston who have incomes below the area median can receive a grant (meaning no repayment) worth as much as $50,000. Even buyers under 135% of the median income can get as much as $35,000.

Springfield’s Homebuyer Program
In the city of Springfield, buyers can receive assistance up to $4,000, which can be used to help with downpayment and closing costs.

Worcester’s Downpayment Program
Buyers in the city of Worcester can utilize a downpayment program that provides a conditional grant worth as much as $5,000.

Common Requirements for Massachusetts DPA Programs

Each program has unique requirements, but most restrict the assistance to low- and moderate-income buyers. For example, the MassHousing support of $50,000 is only available to buyers who have an income at or below the area’s median salary.

Some programs also require that users are first-time buyers. But many programs simply require that you have not owned in the past three years to qualify as a “first-time” homeowner.

There could also be restrictions on the purchase price. Worcester’s DPA program restricts purchases to less than 95% of the area’s median purchase price.

There may also be requirements for credit score, debt-to-income ratios, and other factors that could limit eligibility.

If you are an aspiring homebuyer with a moderate income, you will likely qualify for downpayment support of some kind. Contact our team to learn more about DPA programs in Massachusetts.