How to Buy a House in Massachusetts: 6 Steps

Purchasing a house represents a major financial decision, often involving significant long-term commitments. In Massachusetts, the average home value is $635,183, which is notably higher than the national average of $362,481. This discrepancy may impact affordability for potential homeowners in the state.

Understanding down payment assistance programs, mortgage types and state-specific regulations can ensure a smooth journey toward homeownership in the Bay State. MoneyGeek has compiled essential pointers to help you navigate the homebuying process in Massachusetts, from saving the down payment and choosing the ideal location to finding the best financing option for your particular needs and credit history.

In the second quarter of 2024, the homeowner vacancy rate in Massachusetts was 0.3%, according to the U.S. Census Bureau. The homeowner vacancy rate measures the percentage of homes that are vacant and available for sale. This metric provides insight into the housing market's supply and demand dynamics.

With a homeowner vacancy rate of 0.3% in Massachusetts during this period, there is not enough inventory on the market to satisfy homebuyer demand. A stable vacancy rate, which offers homebuyers some choice and flexibility, is typically around 2%. This low rate suggests that the housing market is highly competitive, with limited options for prospective buyers. For homebuyers, this means being prepared to act quickly when a property becomes available and possibly facing higher prices due to the demand exceeding supply.

Before buying a house in Massachusetts, it's important to review your financial and credit history. A strong financial profile increases your chances of getting approved when applying for a mortgage. Lenders assess your creditworthiness and financial stability, so ensuring your credit score is in good shape and you have a solid down payment can make the homebuying process smoother.

Your credit score plays a pivotal role in determining the mortgage loans and interest rates you qualify for. A higher score increases the likelihood of securing a reasonable rate. As of Q3 2023, the average credit score in Massachusetts is 732, according to Experian.

If your credit score is considered poor, which FICO defines as below 580, you can still purchase a home, though securing a mortgage may be challenging. Check the table below to see which mortgage type is ideal for you based on the minimum credit score requirements.

Source: Experian

Your debt-to-income ratio (DTI) is a critical factor lenders use to determine how much of your monthly income goes towards debt payments. This helps them evaluate the amount of mortgage debt you can responsibly take on. In Massachusetts, the average mortgage debt was $303,009 in the third quarter of 2023, according to Experian. This figure underscores the additional financial responsibility potential homebuyers face.

Monthly debt payments included in your DTI calculation are mortgages, credit cards, auto loans, student loans and other personal debts. Use our debt-to-income ratio calculator below to see your front-end DTI, which considers housing expenses and back-end DTI, which includes all debts. This tool can help you assess your total monthly debt payments and better understand your financial standing.

Buying a house is a major financial commitment and it's easy to fall into the trap of purchasing beyond your means. To avoid this mistake, consider using the 28% rule as a guideline. This rule suggests that you should not spend more than 28% of your monthly income on your mortgage payment. By adhering to this principle, you can maintain financial stability and avoid the stress of unmanageable debt.

In Massachusetts, the median annual income as of April 2024 is $60,690, according to the U.S. Bureau of Labor Statistics. This equates to a gross monthly income of $5,058 before taxes. Applying the 28% rule, a homebuyer should aim for a monthly mortgage payment of no more than $1,416. This example illustrates how the rule can help you set realistic expectations and make informed decisions about your home purchase.

Use our mortgage calculator below to get a ballpark figure of your monthly mortgage payment in Massachusetts.

A down payment is the initial amount paid when purchasing a house, often set at 20% of the home's price. This standard can pose a significant challenge for many homebuyers. For example, the average home value in Massachusetts is $635,183, making a 20% down payment $127,037. For homes priced above average, such as $650,000, the 20% down payment would be $130,000.

Fortunately, saving 20% for a down payment is not a requirement. Many mortgage options allow for lower down payments. Government-backed loans, such as VA loans, require no down payment, while FHA loans require only 3.5%.

Remember, if you put down less than 20%, your lender may require you to take out private mortgage insurance. You can use our PMI calculator to estimate your monthly premium based on your credit score and down payment.

Massachusetts offers several down payment assistance programs designed to make homeownership more accessible. These programs can significantly reduce the financial burden of buying a home, allowing more individuals to achieve their dream of owning property. Prospective homebuyers should explore these opportunities to understand how they can benefit from them.
Check out the table below for the available down payment assistance programs in Massachusetts offered by MassHousing.

Finding the right location in Massachusetts involves balancing financial and lifestyle considerations. Start by evaluating the average house price in potential areas and consider how close you'll be to family, friends and work or school. Access to public transportation, parks, restaurants and shopping centers can also influence your decision, offering convenience and enhancing your quality of life.

While location amenities are important, understanding the cost of living is crucial. According to the Missouri Economic Research and Information Center (MERIC), Massachusetts has a cost of living index of 144.3 in the first quarter of 2024, which is significantly higher than the national average of 100. Consider the following expenses when choosing your new home location:

• Food
• Healthcare
• Clothing
• Utilities
• Education
• Transportation
• Entertainment

Source: Zillow

Working with a real estate agent can greatly speed up your house hunt in Massachusetts. They provide the advice you need, manage the paperwork and give you access to an expanded list of property options you might not find on your own. Additionally, they can recommend other service providers like title companies and inspectors to assist in purchasing your home.

When finding a real estate agent, it's essential to do your due diligence and interview those who have experience in the neighborhoods you're interested in. Consider the following tips:

• Find someone compatible with your needs and personality
  
• Verify the agent's credentials, training and licensure
  
• Ensure they have in-depth knowledge of the area
  
• Shop around for agents and compare their rates
  

You can also use the license holder search tool from the Massachusetts Division of Occupational Licensure to find or verify real estate agents in Massachusetts.

In Massachusetts, navigating the homebuying process involves selecting the best mortgage you can afford. Options include conventional loans, jumbo loans, FHA loans, VA loans and USDA loans. You also have the flexibility to choose from 10-year, 15-year, 20-year, or 30-year terms and decide between a fixed-rate mortgage or an adjustable-rate mortgage (ARM). Choosing the right financing option not only boosts your chances of approval but can also save you money over time.

Interest rates on a mortgage can fluctuate daily due to various factors such as the type of mortgage, the lender and the current state of the economy. While the interest rate is a key component of a mortgage, the APR (annual percentage rate) provides a more comprehensive picture. The APR includes the interest rate along with any additional fees or costs associated with the loan, offering a true representation of the borrowing cost.

As of October 2024, the APR for a 30-year fixed conforming loan in Massachusetts stands at 5.96%, while the APR for a 30-year fixed rate FHA loan is 7.69%. For those looking to explore further, the table below provides current mortgage rates in Massachusetts by mortgage type.

Obtaining a mortgage pre-approval in Massachusetts is a key step in the home-buying process. It allows you to understand your borrowing capacity, making it easier to focus on homes within your budget. Lenders typically issue a mortgage pre-approval letter, which signals to sellers that you are a serious buyer with the financial backing to make an offer. This letter is usually valid for 60 to 90 days, giving you ample time to search for your ideal home.

To get pre-approved, you need to submit several documents, including:

• Proof of income
• Employment verification
• Credit history
• Bank statements
• Tax returns

Home inspections are highly recommended in the homebuying process in Massachusetts. They help identify potential issues that may not be visible during a casual walkthrough. Inspectors typically examine various parts of the house, including the roof, foundation, plumbing, electrical systems and HVAC. The inspection report provides a detailed account of the home's condition, highlighting any repairs that may be necessary. This information can be crucial for buyers to make informed decisions about their purchase.

For example, an inspection might reveal significant issues, such as a damaged roof or faulty electrical wiring. These findings can affect the home's appraisal, potentially lowering its value. In such cases, buyers might reconsider their offer, especially if the cost of repairs is substantial. The inspection results can lead to negotiations with the seller or even prompt the buyer to rescind their offer if the property does not meet their expectations.

Home inspections in Massachusetts are regulated by the Board of Registration of Home Inspectors, which functions under the Massachusetts Division of Occupational Licensure. Home inspectors are required to provide clients with a report detailing the physical conditions of the home's systems and components that are readily accessible and observable. This ensures that homebuyers receive a comprehensive overview of the property's condition.

When looking for a home inspector in Massachusetts, ensure they are licensed. It's wise to find out what other clients have said by checking online reviews and asking for references. This can provide insight into the inspector's reliability and professionalism. You can also use the Division of Occupational Licensure's ePlace portal to find or verify licensed home inspectors in the state. Taking these steps can help you make an informed decision and avoid potential issues during your home buying process.

Home appraisals play a pivotal role in the homebuying process in Massachusetts. They provide an unbiased estimate of a property's market value, which is crucial for both buyers and lenders. Knowing the accurate value helps buyers avoid overpaying and ensures lenders do not issue loans that exceed the property's worth. According to the 2023 Appraisal Survey from the National Association of Realtors (NAR), the median appraisal cost in 2023 was $500.

While both inspections and appraisals are integral to the homebuying process, they serve different purposes. A home appraisal focuses on determining the property's market value, whereas a home inspection evaluates the condition of the property. Lenders require appraisals to ensure the property's value aligns with the loan amount, safeguarding their investment. Understanding these differences helps buyers navigate the process more effectively.

Closing is the final step in buying a house in Massachusetts, marking the transfer of ownership and when you receive the keys to your new home. Your lender must provide you with a closing disclosure document three days before the official closing. This document outlines your loan terms, projected monthly payments and closing costs. Plan a final walk-through of the property with your real estate agent near closing day to ensure it remains in the expected condition.

On closing day, you will review and complete several documents that finalize your home purchase. These include:

• Final loan application: This document finalizes the terms and conditions of your mortgage loan, including the loan amount, interest rate and repayment terms. It ensures that both you and the lender agree to the finalized terms.
• Deed transfer: This legal document transfers ownership of the property from the seller to you. It ensures you become the official owner of your new home.
• Promissory mortgage note: This is a written promise to repay the mortgage loan under specified terms, outlining the amount borrowed, interest rate and payment schedule. It serves as a legal commitment to your lender.
• Homeowners insurance: A policy that protects your home and belongings from damage or loss. In Massachusetts, homeowners insurance in Massachusetts can cover risks like fire, theft and liability, offering peace of mind as you settle into your new home.

Closing costs are the various fees and expenses you pay when finalizing a home purchase. The closing costs in Massachusetts average $6,223 according to NAR. These costs include several different fees:

• Appraisal fee: This fee pays for a professional appraisal of the property's value.
• Title search and insurance fee: This covers the cost of researching the property's title history and purchasing title insurance.
• Escrow deposit: This is an initial deposit into an escrow account for property taxes and insurance.
• Prepaid costs: These are upfront payments for future expenses like homeowner's insurance and property taxes.
• Other closing costs: These can include a variety of fees such as loan origination fees, recording fees and attorney fees.

If you are a first-time homebuyer, learning about the different first-time homebuyer programs in Massachusetts can help you achieve homeownership faster.

Buying a house in Massachusetts is a long-term financial commitment. We answered some frequently asked questions about buying a house in Massachusetts to kickstart your homebuyer journey.