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    Here’s what you need to know about MassHousing’s zero down-payment program

    Andy Dean Photography

    To give first-time prospective homebuyers a leg up in the state’s expensive housing market, MassHousing has long offered low-interest mortgages with minimal down payments, based on certain income eligibility requirements — most borrowers qualify for 97 percent financing through the quasi-public agency. On Monday, MassHousing went a step further by launching a new program that makes it possible for borrowers to take out a second loan that covers their down payment.

    Here’s how the new program works:

     MassHousing will provide “down-payment assistance” covering as much as 3 percent of the cost of a house or condo priced up to $400,000. The maximum amount of down-payment help you can receive is $12,000, even if you buy a home that costs more than $400,000.

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     The down payment money is not a grant, however — it’s a loan you will be required to pay back through a 15-year second mortgage with a fixed interest rate of 1 percent and no additional fees.

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     To qualify for the down-payment assistance program, you must have a credit score of at least 660, a debt-to-income ratio of 41 percent, and an annual household income at or below the area’s median income. That’s up to $103,400 in the eastern part of the state, $85,700 in Worcester County, and $67,200 in Berkshire County. Also, you must attend a first-time homebuyers class.

     Once you make an offer on a property, you can then formally apply for the MassHousing mortgage. Most MassHousing loan borrowers qualify for a mortgage that covers up to 97 percent of the purchase price. As part of the application process, you will also do paperwork for a second mortgage — the one that covers the down payment up to 3 percent, or $12,000. MassHousing is itself not a lender, but it works with a network of 150 banks, credit unions, and mortgage companies.

     After your offer is accepted, you’re locked in to the two separate MassHousing mortgage loans, which are delivered in tandem — one for the bulk of the borrowing, and the other for the down payment.

    Katheleen Conti can be reached at kconti@globe.com. Follow her on Twitter @GlobeKConti.