A Step-By-Step Guide to Getting Approved for a Home Loan in Massachusetts

A home purchase is a major investment, and for many intending Massachusetts home buyers, mortgages help them achieve this huge financial feat easily. However, the mortgage process can be confusing and intimidating, especially for first-time property buyers. 

In Massachusetts, first-time buyers have unique state regulations impacting the home loan process. However, with careful preparation and planning, getting a home loan pre-approval can be a straightforward and smooth process. 

This step-by-step guide to getting preapproved for a home loan will help prospective buyers get the resources and information they need to navigate Massachusetts’ complex home loan process. 

From mortgage programs available to first-time Massachusetts home buyers to home loans intending homeowners can access, this guide covers all you need to secure your dream property in MA.

What Is Mortgage Pre Approval

The Bank of America describes mortgage pre-approval as the closest property buyers can get to confirming their creditworthiness while shopping for home financing options. 

To get pre-approval, you’ll complete a mortgage application while the lender verifies your information and performs a credit check to determine your eligibility.

How to Get Approved for a Home Loan

Most first-time buyers in Massachusetts often wonder how to get a pre-approval letter. Before getting preapproved for a home loan, work with more than one lender to check your financial information and get a loan estimate.

The following is part of the mortgage pre-qualification process:

• Prepare for Financial Documentation

The mortgage pre-approval process is simply the mortgage application, meaning your loan officer or lender will take a good look at your finances. To start the process, Massachusetts borrowers must gather documents like proof of assets, identification, proof of income, credit reports, employment verification, and debt-to-income report.

Before beginning the mortgage preapprovals, you’ll also need to check off a few items on your mortgage preapproval checklist, such as your driver’s license, bank statements, W-2 statements, social security numbers, and pay stubs. 

After submitting your financial documents to multiple lenders, expect to get your loan estimate within three business days. The loan estimate lets you know if you’ve been pre-approved and the amount you’ll get.

• Prepare for Pre-approval 

Mortgage pre-approval isn’t only for your lender. Knowing the mortgage amount you can take out will help you narrow down your options and focus on affordable homes for sale, meaning the best time for getting preapproved for a mortgage is before you start the home-buying journey. 

If you’re shopping for a new home in the Massachusetts real estate market, apply for a preapproval from many mortgage lenders early to discover your mortgage options. That way, your real estate agent will know you’re a serious buyer.

• Check Your Credit Score

One of the steps to getting pre-approved for a mortgage is checking your credit score. While a pre-approval inquiry into your credit might lead to a slight drop in your score, mortgage pre-approval will only result in a lower credit score if your credit score is already low.

Subsequent credit score inquiries from other mortgage lenders within the same period (45 days) won’t affect your credit score.

• Get Your Pre-Approval Letter

At this stage, you need to get a mortgage preapproval letter. You might be wondering how to get a pre-approval letter; it’s easy. Once you get preapproved for a mortgage, you’ll receive a preapproval letter. 

Mortgage preapproval letters are crucial for many reasons. Firstly, realtors request a preapproval letter before showing buyers houses, ensuring they don’t waste their time showing homes outside your budget.

Secondly, you can share the preapproval letter with the seller when making an offer, showing you’ve started the financing process for the offered amount.

If you’re wondering how to fill out a pre-approval for a mortgage, ask your mortgage lender for help.

• Understand the Duration of the Preapproval Process 

Since pre-approval expires, you need to remember and check the expiration date when looking for homes for sale. Though the expiration varies from one mortgage lender to another, pre-approval validity is 60-90 days before the final loan approval.

If you haven’t found a home before your pre-approval expiration, you can request renewal by updating your lender with your latest credit and financial information.

Types of Home Loans Available to First-time Massachusetts Home Buyers

Besides learning the steps for getting preapproved for a home loan, you need to know the loan options available to first-time Massachusetts home buyers. 

Jumbo, conventional, Veteran Affairs (VA), the United States Department of Agriculture (USDA), and Federal Housing Administration (FHA) loans are some of the loan options Massachusetts property buyers can choose from. 

Due to the wide range of available loan options, choosing the right home loan can be challenging. The following are some of the options for first-time home buyers in Massachusetts:

1. MassHousing

This loan, with backing from the Massachusetts Housing Finance Agency, is designed to help Massachusetts residents refinance or buy a home. 

Some of the perks of MassHousing include: 

• Low down payment
• Loan options for active-duty military and veterans
• Low-cost mortgage insurance options
• Job loss protection
• Up to $12,000 down payment assistance

2. Jumbo (Non-Conforming) Loan

Non-conforming or Jumbo loans are mortgages that exceed Freddie Mac or Fannie Mae conforming loan limits. Here, borrowers can get more than a government-backed or conventional loan. 

Also, there’s potential for zero or low mortgage insurance rates.

Conventional Loan

Conventional mortgages are loans from the private sector following the guidelines from Freddie Mac and Fannie Mae. Intending home buyers can choose from 30-year, 20-year, or 15-year mortgages. 

Some of the benefits of conventional loans are:

• A shorter underwriter approval process
• Stable interest rates
• No upfront mortgage insurance
• Low down payment
• More appealing to sellers
• Potential for low or zero mortgage insurance

4. VA Loan

The US Department of Veterans Affairs guarantees VA loans issued by private lenders to make homeownership affordable for veterans. 

Some of the perks of a Veterans Affairs home loan include:

• Low-interest rates
• No cash reserves
• No down payment
• Sellers help pay closing costs
• No application fee
• Funding fees might be financed
• Zero monthly mortgage insurance premiums

5. USDA Loan

This government-backed loan is insured by the US Department of Agriculture’s Rural Housing Program to help moderate to low-income households buy a home in rural areas.

Home buyers enjoy the following under USDA loan:

• Easy eligibility
• Reduced monthly mortgage insurance
• Low mortgage rates
• Zero down payment
• 100% financing

6. FHA Loan

Insured by the Federal Housing Administration, this type of government-backed loan with a low down payment offers many benefits, including:

• Fixed or adjustable rate
• Low down payment
• No prepayment penalty
• Flexible credit review
• Special 203(k) program for property maintenance and repairs
• Sellers can help offset closing costs
• Accessible to intending homeowners with no or low credit history

Mortgage Programs for First-time Home Buyers in Massachusetts 

Some associations and organizations offer grants to help mortgage borrowers afford a down payment. The following are mortgage programs for first-time home buyers in MA:

• The Good Neighbor Next Door Initiative

The US Department of Housing and Urban Development (HUD) funds this mortgage to encourage law enforcement officers, teachers, emergency medical technicians, and firefighters to buy homes in revitalization areas. 

Qualified first-time buyers in Massachusetts who agree to stay in homes in the HUD’s inventory for a minimum of 36 months will enjoy a 50% discount on the home price.

• Fannie Mae’s HomePath ReadyBuyer Program 

Buyers participating in Fannie Mae’s HomePath ReadyBuyer Program are eligible for about three percent closing cost assistance to help buy a HomePath property.

• The HUD Dollar Homes Initiative

This loan program helps local governments provide housing opportunities for moderate to low-income families while addressing community needs by allowing them to buy qualified HUD-owned houses for $1. 

• The National Homebuyers Fund 

The National Homebuyers Fund program offers closing cost assistance and down payment assistance (DPA) of up to five percent of the loan amount for buyers in all the states.

Tips for Intending Home Buyers in Massachusetts 

The following are vital tips for intending home buyers looking to obtain a home loan in Massachusetts:

1. Get Pre-Qualified

Although prequalification isn’t a mandatory stage in the mortgage loan process, mortgage prequalification offers borrowers an estimate of the amount they’ve been approved to borrow before beginning their house hunt. Hence, it increases the chances of home sellers accepting your offer. 

To receive pre-qualification, you have to submit the following:

• Employee verification letter
• Savings account
• Proof of income
• Stock dividends
• The last two months’ pay stubs
• Proof of assets
• Last two years’ income tax returns and IRS W-2 forms
• Investment account statements
• 401(k)

Mortgage prequalification doesn’t mean actual mortgage approval. You still have to undergo the standard loan application process to secure funding for your home.

Also, after getting the loan, you need to consider mortgage debt payments to repay the loan without default.

2. Make an Offer

Your real estate agent can negotiate with the home seller to reduce the list price depending on the property’s location, whether it requires upgrades or repairs, and the number of days it has spent on the market. 

After submitting your initial offer, you need to schedule a home inspection to discover if the home has defects. A report of pre-existing issues in the house will enable you to renegotiate or withdraw your offer.

3. Apply for a Mortgage

After submitting your final offer, the mortgage application window will open for 90 days. Your mortgage broker will act as the liaison between you and the lender. 

Once you’ve sent an application to your preferred lender, an underwriter will check your ability to repay debts based on factors like monthly income stability, assets, debt-to-income ratio, employment history, credit report, and a higher credit score.

4. Obtain a Home Appraisal

The underwriter will request a home appraisal from a professional appraiser before issuing their final mortgage approval. That way, the lender will learn the home’s actual worth, ensuring the buyer doesn’t overborrow. 

After the appraisal, the underwriter will review the report before the final approval.

5. Close on Your Home

At this stage, it’s time to close on the home. Your broker will review and help you sign all the loan documentation while you pay for the closing cost, including escrow fees, insurance, title search, legal fees, an origination fee, and the appraisal fee. 

FAQs 

How Much Down Payment Do You Need to Purchase a Home in Massachusetts?

When buying a home in MA, the down payment amount varies depending on your financial circumstances and loan type. Generally, the down payment falls between 3-20% of the property purchase price.

How Much Loan Can You Borrow for a Home Purchase in Massachusetts?

The maximum loan amount depends on your debt-to-income ratio, income, and credit score. Consult a lender or use an online calculator to get an estimate of the highest amount you can borrow.

How Long Does the Home Loan Approval Take?

The property loan pre-approval process varies depending on the lender’s requirements, income, and credit history. Typically, the loan approval process takes about 30-45 days. However, it can be longer if the lender requests additional documentation.

Key Takeaways 

Obtaining Massachusetts mortgage loans might be daunting. However, with the right approach and expert help, you can obtain financing for your dream house. 

However, it’s best to request a credit report, check your credit scores, put aside money for a down payment, and go for government-backed loans if you have a low credit score. That way, you’ll decide how much house to search for when going house hunting. 

With diligence and careful planning, your dreams of becoming a Massachusetts homeowner will become a reality. Remember that the loan process varies depending on your financial situation. So, seek professional advice from many lenders or financial advisors.

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If you’re a new buyer in Massachusetts looking for financing options, many loans are available for Massachusetts home buyers. To find a property that matches your pre-qualified amount, work with professional real estate agents from leading agencies like Ardor Homes Massachusetts. 

At Ardor Homes Massachusetts, our knowledgeable and experienced real estate agents can help you find your dream house at the best price in any part of Massachusetts.