What to know about mortgage rates in Massachusetts

Young couple in front of their new Massachusetts homeImage: Young couple in front of their new Massachusetts home
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Almost 7 million people call Massachusetts home, although the state is only 10,554 square miles. People are drawn to the Bay State by its four distinct seasons, career opportunities at big-name companies like General Electric and Liberty Mutual, and top-notch universities including Harvard University and Massachusetts Institute of Technology.

If you’re searching for a home in Massachusetts, remember to shop around and compare mortgage rates. What may seem like a small difference could add up to thousands of dollars over the course of a 15-year or 30-year mortgage.

Mortgage debt in Massachusetts

Credit Karma members with mortgages in Massachusetts had average mortgage debt of $273,506 in 2020 and average monthly mortgage payments of $1,814.

That puts Massachusetts a good bit above average for both mortgage debt and average monthly mortgage payments compared to Credit Karma members across the U.S in 2020.

Types of home loans

If you choose to finance your dream home, you might be overwhelmed by the number of mortgage loan options out there. Here are some of the more common types of mortgages Massachusetts homeowners may consider.

Conventional loans in Massachusetts

Conventional loans are mortgages that aren’t part of government programs. These loans tend to be good for people with solid credit and a down payment of at least 3% to 5%.

Massachusetts FHA loans

FHA loans are a good option for first-time homebuyers to explore — particularly if your credit is less than perfect. That’s because you may be able to qualify with credit scores as low as 580 with a 3.5% down payment or 500 with a down payment of 10%. This FICO® score requirement is the FHA minimum standard. In general, additional lender credit score requirements may apply.

The FHA loan limit in 2021 is generally $356,352 for a one-unit property, but it can reach as high as $822,375 depending on where you live.

There are several areas in Massachusetts with higher FHA loan limits, especially around large population centers or vacation spots like Cape Cod and Martha’s Vineyard.

  • Barnstable Town
  • Providence-Warwick
  • Vineyard Haven
  • Boston-Cambridge-Newton
  • Worcester
  • Nantucket County

You can find the exact limit by county on the U.S. Department of Housing and Urban Development website.

VA loans in Massachusetts

If you’re an eligible veteran or service member comparing mortgage rates in Massachusetts, a VA loan can be attractive since down payments and mortgage insurance aren’t required and you may be able to qualify with a shaky credit past.

Similar to FHA loans, VA loans are insured by the federal government but issued by private lenders.

Conforming loan limits in Massachusetts

Conforming loans are a type of home loan that meets certain loan limits set by the Federal Housing Finance Agency. This means they can be bought by Fannie Mae and Freddie Mac, government-sponsored enterprises that guarantee mortgages.

Loans that exceed conforming loan limits are known as jumbo loans. Lenders often consider these loans riskier than conforming loans.

Half of Massachusetts’ counties have a conforming loan limit of $548,250 in 2021. Seven counties in Massachusetts have a conforming loan limit that’s higher than normal: Dukes, Essex, Middlesex, Nantucket, Norfolk, Plymouth and Suffolk counties.

First-time homebuyer programs in Massachusetts

If you’re hoping to buy your first home, there may be some assistance programs available to you in Massachusetts.

  • MassHousing Mortgage Program — This program says it offers first-time homebuyers “affordable financing.” To qualify, you must buy a home or condo in Massachusetts and meet income requirements.
  • MassHousing Workforce Advantage 2.0 Program — The MassHousing Workforce Advantage 2.0 Program offers first-time homebuyers down payment assistance of up to $25,000, depending on where you live in the state. You may be eligible if you earn up to 80% of the area median income and buy a single-family home or condo or a two-family property in Massachusetts.
  • MassHousing MI Plus Mortgage Insurance Program — MassHousing mortgages feature MI Plus mortgage insurance, which may pay for the principal and interest of your mortgage payments for as long as six months (and up to $2,000) if you lose your job.

Mortgage refinancing rates in Massachusetts

If you’re thinking about refinancing your mortgage, keep a few things in mind.

  • Break-even cost — Once you know the closing costs for your refinance, you can use any savings on your monthly mortgage payment to calculate how long it will take you to recoup that investment and “break even.”
  • Cash-out refinance — Have you accumulated equity in your home that you’d like to convert to cash? A cash-out refinance lets you refinance your home for more than what you owe and get cash in return. But remember that you’ll owe the full amount plus interest, and the equity in your home will be less if you sell in the future. 
  • Loan term — You also may want to either shorten or extend your loan term. For instance, if you have a 30-year mortgage, you may want to convert it to a 15-year loan. Keep in mind that reducing your term likely means you’re paying more each month — but less in interest over time. Lengthening your loan term may mean you pay less each month, but more interest over the course of the mortgage.

About the author: Anna Baluch is a freelance personal finance writer from Cleveland, Ohio. You can find her work on sites like The Balance, Freedom Debt Relief, LendingTree and RateGenius. Anna has an MBA in marketing from Roosevelt Un… Read more.