Whether you are attracted to the bustle of Boston
, looking to settle down on the coast, or looking for somewhere affordable in the western part of the state, there are plenty of options to choose from when buying a house in Massachusetts
. If you are house-hunting for the first time, it’s easy to get overwhelmed if you don’t know where to start.
To help make buying a home as simple as possible, home and car insurance
comparison app Jerry
has created a guide to walk you through the process. From figuring out your budget to putting in an offer, we’ll explain everything you need to know about buying a house in Massachusetts. RECOMMENDEDNo spam or unwanted phone calls · No long forms
Figure out your finances
If you are ready to buy a house in Massachusetts, the first step is taking a look at your financial situation. You’ll need to know your credit score, your debt-to-income ratio, and have a good understanding of how much money you have saved for a down payment and closing costs.
Without a clear picture of your financial state, you won’t have a realistic perspective on what kind of house you can afford. So, before you do anything else, you’ll need to gather your bank statements and other financial documents and start crunching numbers.
Check your credit score
One of the most important things when you are getting ready to buy a house is making sure your credit score is high enough. Typically, you will need a credit score of 620 or higher to qualify for a conventional mortgage in Massachusetts.
If your credit score is below 620, you don’t have to give up on your dream of owning a home just yet. If you are starting the process of house-hunting with a low credit score, your two options are:
Build your credit: If you are still saving up for a down payment, you can take some extra time to also increase your credit score. If you can raise your credit score to 620, you can qualify for a standard mortgage.
Choose a low-credit loan: The Federal Housing Administration (FHA) and Veterans Administration (VA) offer low-credit mortgage options to Massachusetts homebuyers. You can qualify for an FHA low-credit mortgage with a credit score as low as 530, while you only need a 500 score to qualify for a VA low-credit mortgage. Loans from the VA are only available to active duty service members and veterans.
Calculate your debt-to-income (DTI) ratio
Another important thing that a lender will consider when you apply for a mortgage is your debt-to-income ratio, also known as your DTI, which is a measure of how quickly you are able to pay off your current debts.
You can calculate your DTI by adding all of your monthly payments together and dividing them by your gross (pre-tax) monthly income. Monthly payments you should add when determining your DTI include:
When you are applying for a mortgage, a lower DTI is better. Ideally, you’ll want 36% or lower to qualify for a conventional mortgage, but you will have a difficult time finding a lender in Massachusetts if your DTI is greater than 50%.
You can reduce your DTI by either paying off some of your existing debts, decreasing your spending, or increasing your monthly income.
Determine your down payment
When you are buying a house, the down payment is the percentage of a house’s total cost you have to pay upfront. The type of mortgage you have and the cost of the house both affect how much money your down payment will be.
Since it is the largest payment you’ll make when buying a house, determining a realistic down payment for your budget can help you figure out what type of home you can afford.
With a conventional mortgage, the down payment will typically be 20% of the house’s total cost, but your down payment will be significantly lower with other types of mortgages.
An FHA mortgage can have a down payment as low as 3.5%, while a VA mortgage may not require a down payment at all depending on the details of the loan.
Prepare for closing costs and other fees
Closing costs are the collection of taxes, payments, and fees that you’ll have to pay throughout the homebuying process, including:
Mortgage origination fees
Earnest money (i.e., a good-faith deposit that will go towards your down payment)
According to a 2020 survey from ClosingCorp
, closing costs in Massachusetts are around 1.3% of the purchase price of a house. This means that, though costs can change due to differences in property taxes across the state, the average homebuyer in Massachusetts can expect to pay between $7,000 and $8,000 in closing costs. Massachusetts has no statewide assistance programs to help first-time or lower-income homebuyers with their closing costs. However, certain areas—including Boston—have local assistance programs that homebuyers can utilize if they need help.
Key Takeaway To get a good sense of how your closing costs may change depending on where you decide to buy a house in Massachusetts, research the local property tax in areas you are interested in.
Look for homeowners insurance
Unlike other closing costs, you will continue to pay for your homeowners insurance long after you move into your Massachusetts dream house. The average cost of homeowners insurance in the US is $1,387 per year, or about $115 per month.
Though the cost of homeowners insurance can change from state to state, the best way to make sure that you aren’t paying more than you should be for homeowners insurance is to shop around from different insurance companies for the best prices.
To make getting the right homeowners insurance easy, insurance broker app Jerry
will do the work for you by quickly gathering quotes from dozens of top insurance companies. MORE: How to bundle home and auto insurance to save money
Key Takeaway Evaluate your finances, including your credit score, DTI, down payment, and closing costs, before you start house-hunting in Massachusetts.
Get preapproved for a mortgage
Once you’ve figured out what your budget will be when you start looking for houses and have looked into your mortgage options, the next step is to get preapproved for a mortgage.
Having a letter of preapproval from a lender will help your offer hold more sway to sellers—but some sellers won’t even let you tour their property if you aren’t already approved.
Getting preapproved for a mortgage will require you to:
Provide your social security number to the lender
Provide information about your employment history, assets, debts, and bank
Fill out a mortgage application
Applying for mortgage preapproval is the last thing you should do before you start looking at houses in Massachusetts.
To determine if you qualify for a mortgage, a potential lender will do a hard credit check, which can lower your credit score for a period of time. If you aren’t financially ready to buy a house, applying for a mortgage too early will make it harder to get approved again once you are ready.
How to pick the right mortgage in Massachusetts
When it’s time to pick a mortgage, the mortgage term and interest rate you receive are the main things to take into consideration.
Your mortgage term—which is the time you have to pay back the loan—will usually be 15 or 30 years. With a shorter term, your monthly payment will be higher but your interest rate will be lower. You won’t have to pay as much every month with a longer term, but you will accrue more interest on your mortgage.
Typically, a 15-year mortgage term will have a 2.5% interest rate, while a 30-year term will have a 3.5% interest rate.
To make sure you are getting the best mortgage to fit your needs, compare the options from multiple lenders.
Look for a house
Once you have gotten your finances and mortgage preapproval squared away, you are finally to start the most exciting part of the homebuying process: the house hunt!
Pick your city or neighborhood
Unless you already know where you want to live in Massachusetts, there are many great options to consider when deciding upon a city and neighborhood. Consider the culture and cost of living in your prospective areas.
There’s no way around it: the cost of living in Massachusetts is high. Fortunately, you can generally avoid the most expensive areas by opting to live in western Massachusetts.
If living in an area with good schools close by is an important factor to you, you’re in luck. According to WalletHub
, Massachusetts is ranked #1 in the nation for K-12 schools, meaning that there are lots of areas with great school systems in the state. Massachusetts also has the country’s third densest population, and a large number of the state’s residents live in or around Boston.
If you have to commute to work or drive your kids to school every day, the thought of contending with Boston’s rush hour traffic might be a reason to look at houses in another part of the state.
Buyer’s market vs seller’s market
When you are shopping for a home, it’s good to know whether the local housing market is currently a buyer’s market or a seller’s market.
In a buyer’s market, the demand for houses is lower than the number of houses being sold. If many homes in the area are for sale for a long time, it’s a good indication that the market is currently favoring buyers. This can help you negotiate a lower price when you decide to make an offer on a house.
In a seller’s market, there are more buyers than there are houses on the market. When this happens, houses sell quickly and often for higher than the initial asking price. If you are shopping in a seller’s market, it’s important to quickly make a strong offer when you find a house you want to buy.
Find a real estate agent
The easiest way to take care of the house-buying process—including contacting sellers, arranging tours, and submitting paperwork—is to hire a real estate agent.
Having an agent who is familiar with the local real estate market can make the process of buying a house run smoothly, especially if you are new to the Massachusetts housing market.
A good real estate agent is one who reliably and promptly communicates with you and understands what you are looking for in a house.
Make an offer
Once you’ve found your Massachusetts dream home, the final thing you’ll need to do is to submit an offer.
If you have a real estate agent, they can give you advice on how much money you should offer based on market conditions and help you contact the seller, negotiate your offer, and submit all the necessary paperwork.
How to save on homeowners insurance
Homeowners insurance isn’t usually the first thing on your mind when you are buying a house, but having it is essential to protect your home and everything inside of it.
Using insurance broker app Jerry
is the easiest way to shop around for homeowners insurance. All you have to do is answer a few questions and Jerry will do the rest, getting you competitive quotes from top insurance companies to get you the best policy at the best price. “Jerry
was a great experience. It was my first time buying insurance, and they took their time explaining a lot of insurance terms for me. Shopping around for quotes was super easy!” —Dakota F.
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