Down Payment Assistance Options in Massachusetts

So one of the most common questions that the team and I get asked frequently is can I buy a home with little or no money down? Hey everyone, Chad Rankin with the Rankin Mortgage Team in Worcester, Massachusetts. And the answer is maybe. It's better than no, right?

You're going to hear from many lenders, no. And that's because they don't have any options with zero or little down like we do. We specialize in mass housing, for example. And mass housing has a number of programs that offer down payment assistance. So I'd like to go over some of the most important highlights to the mass housing programs with you.

Now, most importantly started off would be you need to be a first time home buyer. So what does that mean? It means that you have not owned a home in the last three years. And very importantly, that also means that you haven't been, can't be on deed to any home, even if you never purchased it, it was a family members, etc.

Minimum FICO requirements: now, mass housing recently went down to a minimum 640 FICO credit score on all of their programs. That does not necessarily mean that they will pop approve. Mass housing utilizes Freddie Mac and Fannie Mae and FHA underwriting guidelines and decision engines. Does it mean that it's going to pop approve you to 640?

Not necessarily. So we're always working with folks to try to help them achieve the best opportunity and options to help bring up their to get them into the best program.

Maximum household income: there's a difference, depending on which program you choose, that best fits your scenario. One program utilizes the maximum income based off of your household. And in that program, if you fall into the workforce advantage program, it's 80% of the area median income. And even if you and another are the only two people or only single person that's on that application, we're not only using your income, but we're also using all the income in the household.

So if there are adult children, for example, that live in the household, we need to use that income and it's got to be under 80% area median income. So then onto the second program I want to talk to you about it's the first time home buyer program. And that is the one that is probably more commonly used because more people do fit into that. That is up to 135% of the area median income, so significantly higher.

For example, in Worcester county, that's over $101,000 and that's just based off of the applicant alone. So we don't take a look at any income earned otherwise in the home, just the applicant's account.

The maximum acquisition cost limit, otherwise known as maximum purchase price. Mass housing does have maximum acquisition cost limits and they're based on county, so it differs. Like for example, in Worcester county, it's just about $346,000. It's much, much higher than the counties east of Worcester county towards Boston.

Have Mortgage Questions? We Can Help! Click Here

And so we have to be cognizant, be very aware of that when shopping because if you exceed that in Worcester county, for example, then you were no longer eligible for the down payment assistance in the majority of cities and towns. However, there's a caveat to that. And that is if you buy in a gateway city. So Worcester county, for example, that is Worcester, Lemenster, Fitchburg. There is no income limit on those, and you can still utilize the first time home buyer credits for down payment assistance.

Property types: we get this question all the time. A lot of times folks are interested in a multifamily. And if so, there are significant differences between a single family condo and multi-families. So on a single family or condo, it's pretty straightforward.

You can utilize, depending upon which program we got you're qualified for, up to the entire 5% the mass housing will give you. And I won't go too in depth right now, but that's anywhere between $15,000 and $25,000 depending on your workforce advantage or the regular first time home buyer program.

And as I record this, we're actually looking at changes that are coming up with mass housing and that's going to increase as well. So make sure if you reach out to us to just ask us exactly where that stands at this point. But the key is on the single family condo, you can utilize it all.

So let's say you're buying a $300,000 property. You can use $15,000 or otherwise 5% towards the down payment. Whereas with a multifamily, that 5% down Fannie Mae, Freddie Mac actually require that you have to supply 3% from your own funds, it can't even be from a gift. It's got to be from your own funds. So you can only use utilize 2% from mass.

And then on top of that, there are reserves that are required six months of mortgage payment reserves. So if that mortgage payment is $2,500 a month, you need another $15,000 on the sidelines that can't be utilized. Now that can be in the form of non-liquid funds, 401k stocks, et cetera. But have any questions about that I'm happy to answer.

And the all-important debt to income ratio also known as DTI. Now what that is a simple calculation of your gross income versus your total monthly expenses. And there's a front end debt to income ratio and a back end. The front end is just your housing expense, which currently might be your rent. But when you buy and as we calculate your future debt to income ratio, based upon your mortgage application, that'll be the housing payment.

The back end is the combination of that housing payment and any other debts you have: student loans, auto loans, so forth. We're going to go ahead and take a look at that, walk through that with you to see if there's anything we can tweak, any advice we can give you to help you manage that debt to income ratio, see if we can utilize funds one way or another to help you get purchase power that you need.

And there is the first time home buyer course that's required. Now that's nothing to worry about now because it's something that just takes a few hours typically in an evening at home online. It's free. We'll tell you more about that later.

Need a Second Opinion? Click Here for Help!

Now, the most important thing is that we want you to know if you like to seek our advice, we really care about helping people buy homes. We really believe in the American dream and this product is the best that we have to offer in Massachusetts. So what our job I like to say is to really analyze exactly where you stand right now.

And if you're not ready right now, we're going to help guide you and advise you on what's the best, were going to tell you why we feel it's the best. And at the end of the day, my goal is that we get you crystal clarity in whatever the plan is so that if you truly do dream of owning a home, we're going to get you there.

That's our goal. So if we can ever be of any assistance, any help, just reach out to us. We're here for that reason myself or my team, we look forward to talking to you. Thanks.