From Mass Housing

What can I afford?

The first step on the road to home ownership is to determine your budget and establish what you can afford to spend on a property. Remember, along with paying the mortgage, there are other expenses involved. To get a quick idea of how much you can afford to spend on a house, try our Affordability Calculator.

Am I ready?

Before venturing down the path toward home ownership, every first-time home buyer should evaluate their personal finances. To help you understand your personal financial situation, use our printable worksheets to calculate your Gross Monthly Income and Total Monthly Debt.

Things to Consider

Part of your rent payment covers certain housing expenses, some of which are listed below. When you decide to purchase a home, you accept responsibility for paying these expenses. These costs are not included in your monthly mortgage payment but should be part of your budget estimates. They include


  • Property Taxes and Special Assessments
  • Home/Hazard Insurance
  • Utilities
  • Maintenance
  • Home Owner Association (HOA) Fee: Doesn't apply to all purchases. Pays for trash and snow removal and maintenance of common grounds, if applicable.
  • Membership Fee: May pay for recreational facilities and other services (cable TV).

Understanding Credit

Your credit history plays a big role in your ability to purchase a home. The resources below will help you understand your credit and the role it plays in the home buying process:

* Credit Questions and Answers
* ...Understanding Your Credit Report
* To obtain a copy of your credit report, contact the Consumer Credit Counseling Service at 617.426.6644, or visit www.creditcounseling.org

Terminology

It's like there's another language for real estate pros and home owners, and getting a good grasp on the lingo is one of the most challenging aspects of the home buying process. Probably the single most important term you'll hear as you search for a home is mortgage:

* A mortgage is an agreement, in writing, in which a lender pledges money against a piece of real property

A real property is the home you are buying (the term real is used to differentiate between physical property, such as a house, and other types of securities, such as stock or bond certificates).

The borrower uses the money pledged by the lender to pay the property's seller. Over the term of the loan (usually 15 or 30 years), the lender holds the ownership documents to the property (the Title) while the lender is repaid in periodic installments. Along with repaying the principal, or borrowed amount, you also pay interest, which is how the lender profits from lending you the money in the first place. The lower the interest rate, the less you will pay each month on the loan.

As a quasi-state agency, MassHousing is able to offer mortgage loan programs with interest rates that are typically one or two percentage points lower than other lenders across the Commonwealth. For more information about MassHousing and their programs, visit www.masshousing.com

You should think of a mortgage as a product that you purchase; the goal is to get the best price (lowest interest rate) at the most favorable terms. Therefore, as with all major purchases, you should shop around and research your options before deciding which program is best for you.

Downpayments

While most home buyers rely on a mortgage to purchase their home, no mortgage will cover the entire purchase price. Buyers must use their own funds to make an initial payment, known as a downpayment, on the home they are buying. Lenders believe that buyers who contribute their own funds to the purchase of a home represent a better overall credit risk.

Conventional lenders may require downpayments of as much as 20% of the home purchase price; MassHousing requires low downpayments, in some cases as little as 0%. If a borrower makes a downpayment of 3%, all of it must be the borrower's own funds. These flexible downpayment requirements recognize that with housing costs increasing over the past decade, many families have difficulty saving for a downpayment and as well as mortgage closing costs.

Acquisition Cost Limits

If you pursue a MassHousing mortgage program, the property you plan to purchase must be within MassHousing's home acquisition cost limits. These limits are set in accordance with federal law and vary depending on the geographic area in which you are buying and the type of home (e.g., single family, multi-family) you are purchasing. The acquisition cost is the cost of acquiring a residence from the seller as a complete unit.

To view MassHousing's acquisition limits, visit www.masshousing.com/consumers

Financial Questions

Do you have questions about the financial aspects of home ownership? You may find the information you need in our list of common questions and answers. Go>>