What is a Massachusetts FHA Loan?
A Massachusetts FHA loan is a government guaranteed home loan from the state of Massachusetts. FHA loans are insured by either the Federal Housing Administration (FHA) or the US Department of Housing and Urban Development (HUD). As insurers, the FHA or HUD agree to compensate the lenders if the borrower defaults on the loan. Since the loan is insured, it has a lower risk for the lender and, in turn, the lender pays forward benefits to the borrower, in the form of lower rates, more lenient credit requirements, and lower down payments (to help get a clearer idea of a mortgage cost, check out our mortgage calculator). The down payments, in particular, are a benefit to first-time homeowners, as they can be paid for as a gift from a friend or family member.
To qualify for an FHA loan with a 3.5% down payment, your credit score needs to be 580 or better. If your credit score is worse than 580 than you may qualify for an FHA loan with a 10% down payment. FHA loans are rarely given out to borrowers whose credit is worse the 500, but exceptions are sometimes made if the borrower’s credit history has been good for the past two years. Individual lenders cannot give FHA loans to borrowers who don’t meet these minimum standards, and they often have stricter credit requirements themselves.
Additionally, beyond your credit history, lenders will look at your employment history and your debt to income ratios. As a minimum, you need to have held your current employment for at least two years. Lenders also look back on your previous employment history to assess if there are any significant unjustified gaps in employment. You need to have a mortgage payment expense to income ratio of 31% or less, which means that you can’t be spending more than 31% of your income on your mortgage payments. Also, your total fixed payment to income ratio needs to be 43% or less, which means that you cannot be spending more than 43% of your income between all of your debt payment obligations (FHA loan, car loan, student loan, etc).
FHA loans are only given to legal US residents. The funds from an FHA loan can only be spent purchasing, improving or refinancing the borrower’s primary residence.
FHA loan rates will fluctuate with every case. That said, borrowers' overall financial standing will have a bearing on severity. Higher credit scores and better financial histories will tend towards loans with lower rates, while lower scores and poorer histories will tend toward higher rates (see our definitive guide to rebuilding your credit). Additionally, the type of loan will have an influence on its rates; for example, shorter loans will generally feature higher rates, while they tend to be lower in the case of longer loans.
Maximum ($) Limits - By County
Like every state offering FHA loans, which is all of them, Massachusetts has limits placed by HUD on how high FHA loans can be, determined by the relative wealth of given counties and also by home type. A complete index of these limits is available below via our custom interactive table.