Massachusetts FHA Loans

In 1934, The Federal Housing Administration (FHA) was established with the goal of improving housing standards and conditions while providing adequate home financing options for families that would otherwise be unable to afford it, like first-time home buyers and those with subpar credit histories. 

Because these FHA home loans are insured by the FHA (now part of the US Department of Housing and Urban Development), they offer several benefits over traditional mortgages, including low down payments and very flexible credit requirements. There are also various types of FHA loans offered to accommodate specific needs, like fixed-rate and adjustable-rate mortgages, specialized loans for condos or manufactured homes, reverse mortgages, and programs to encourage refurbishment of an existing home.

FHA loans typically require down payments of 3.5% to 10% of the purchase price, compared to the common down payment range of at least 5% to 20% for conventional mortgage loans. FHA loan requirements in Massachusetts are also substantially more relaxed, with FICO scores as low as 500 being potentially able to qualify. Bankruptcies are also considered with reestablished credit history and good payment habits.

FHA loans do have limits, which vary by location and are based on median home prices in the area. The property must also meet specific standards set by the FHA to ensure that they are safe, sound, and structurally secure. FHA home loans are also different from government-backed USDA loans, which are more geared toward those purchasing in rural areas.

Those looking to secure an FHA loan in Massachusetts can anticipate several benefits over conventional mortgage loans. Some of the most common Massachusetts FHA loan benefits are:

• Low down payment requirements: FHA loans in Massachusetts often only require a down payment of 3.5% of the purchase price. This lowers the upfront costs of buying a home and enables more people to enjoy the benefits of homeownership, such as capitalizing on home appreciation. 
• More lenient credit requirements: Those with previous bankruptcy, less-than-perfect credit reports, and limited borrowing history are still considered for FHA loans, meaning those with credit challenges can still afford to buy a home.
• Competitive interest rates: Because FHA loans in Massachusetts are guaranteed by the FHA, lenders can offer low interest rates when compared to other financing options, such as conventional mortgages.
• Flexibility: The FHA 203(k) program allows borrowers to finance both the home purchase itself as well as the cost of renovations or repairs – all wrapped into a single mortgage. FHA loans also contain various refinancing options, and are assumable if you decide to sell your home.

If you’re interested in taking out an FHA loan in Massachusetts, keep in mind that there are basic qualification requirements that you’ll have to meet. Here are some of the key FHA loan requirements in Massachusetts:

• Credit score: While Massachusetts FHA loan requirements are typically more lenient than with traditional mortgage loans, applicants should still aim to have a FICO of at least 580 to take advantage of the 3.5% down payment. Scores of 500 to 579 are still considered, however borrowers with this type of credit should expect to make a larger down payment of around 10%. Consider downloading the Griffin Gold app to monitor your financial health and make sure your credit profile is on track for an FHA home loan.
• Debt-to-income ratio (DTI): This is the simple percentage of your gross monthly income (before taxes) that goes toward paying debts and bills. Generally, lenders of FHA home loans in Massachusetts prefer a DTI of no more than 45%. However, a DTI as high as 57% may still be considered, which is much higher than the cutoff for traditional mortgage loans.
• Steady employment and income: Prospective borrowers must have at least two years of consistent, verifiable employment history. However, there are no minimum criteria for income amount, which is great for those just out of college or who’ve recently changed careers.
• Down payment: While the typical 3.5% down payment is much lower than traditional mortgage loans, borrowers must still provide proof that they can pay it. Fortunately, gift funds are permitted to come from family members or other eligible parties. 
• Property requirements: The property being purchased must meet certain condition standards set by the FHA. These standards ensure that the property is safe, sound, and structurally secure.

FHA loan limits in Massachusetts refer to the maximum amount of FHA loan money that borrowers can secure within a specific area. These limits are determined by the Department of Housing and Urban Development and are based on the median home prices in each specific county or population area. 

Currently, single-family FHA loan limits in Massachusetts range from $498,257 in the more affordable western counties, to $1,149,825 in the more expensive eastern counties like Middlesex, Essex, Suffolk, and Nantucket.

Follow these basic steps in order to apply for an FHA home loan in Massachusetts: 

1. Check your eligibility: Ensure you meet the basic eligibility criteria, including credit score, income and employment stability, and debt-to-income ratio (DTI) requirements.
2. Gather required documents: Prepare your proof of income and employment history, bank statements, tax returns, and proof of identity.
3. Get pre-approved: Reach out to Griffin Funding to begin the FHA loan pre-approval process. You can either fill out an application over the phone with one of our mortgage professionals or get started with an online application. 
4. Begin house hunting: Once pre-approved, this is your green light to begin working with a real estate agent to find a home that aligns with the Massachusetts FHA loan limits and your own pre-approval amount.
5. Begin the loan approval and closing process: Submit your official loan application to secure funds to make the purchase. The mortgage professionals at Griffin Funding will help you at every step of the mortgage process and answer any questions you have along the way.

Buying a home – especially your first time or after overcoming financial hardships – can be daunting. Conventional mortgage loans are geared toward high-income, low-debt buyers that present the lowest risk to lenders, so many younger buyers or those with very common financial burdens are unable to secure an approval.

Not only does the FHA loan program open opportunities for more people to own their home, it provides highly competitive interest rates, low down payments, and flexible loan and refinancing programs.

If you’ve struggled getting approved for a conventional home loan or are a first-time buyer with limited income or credit history, reach out to the team at Griffin Funding to walk you through the application process and get you into your dream home! Contact us for more information regarding FHA home loans in Massachusetts or fill out an application today.