FHA Loan vs. MassHousing (for Massachusetts)

Buying & Selling Real Estate
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FHA Loan vs. MassHousing (for Massachusetts)

Christopher Johanson
Investor · Medfield, MA · Member since 2014 · 28 posts · 4 votes

Hello all, 

I've discovered there are slight variables regarding different financing options in my area. I'm looking to purchase in Worcester, MA... and ideally I would like to put a small down payment on, say, $250,000 (Triplex - Owner Occupied). 

It has come to my attention that although FHA loans are discussed frequently throughout the forums here, nobody seems to mention the various Homebuyer Assistance programs that are available depending on the state you live in. Here in Massachusetts, there is such thing as a MassHousing loan, which only requires 3% down (compared to FHA's 3.5% down). The rate is slightly higher, at around 5.15% APR, but it doesn't require mortgage insurance like an FHA loan would. So the PITI is actually lower than the comparable case with an FHA loan.

MassHousing loans will also allow you to account for 65% of *market rent* towards your mortgage loan qualification. (If rent grosses $1000/mo, then they will allow you to count $650/mo as "income" to qualify).

Am I missing something, or is it just a great option that HAPPENS to exist because I live here...?

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Sean LeBlanc
Lender · Salem, NH · Member since 2014 · 46 posts · 23 votes
7y

Hi All, 

Sorry for my absence on this thread, getting back into BP.  

@Kemar White you do not need to live in the house for the life of the loan, the guideline states you must INTEND to live in the property for at least 1 year. 

@Alexander George

The reason you can't go rack up rentals by moving into them using FHA loans is there is a rule that in most situations you can only have one FHA loan at a time.

If your goal is to house hack a few properties in a row to build up your portfolio, it can be done, but you need to be strategic with your loan programs. 

Masshousing offers both conventional and FHA programs with varying terms. You could theoretically use an FHA loan for your first property, then a conventional loan for your second. By the time your ready for your third, you may be able to refinance your original FHA loan into a conventional loan, and then you would be eligible to use an FHA again on the third property.

As you can see there is a lot of red tape to navigate, if this is your plan, you need to make sure you are dealing with a lender who understands this strategy. 

Let me know if I can help out in any way.

Thanks!

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  • Samuel Getant
    Commercial Real Estate Broker · Worcester, MA · Member since 2014 · 38 posts · 6 votes
    11y

    seems to be a great program, and sometimes local programs are better than typical nationwide programs

    0Reply
  • Steven Tierney
    Scituate, MA · Member since 2014 · 44 posts · 13 votes
    11y

    Interesting, I'd like to know more too!

    0Reply
  • Christopher Johanson
    OP
    Investor · Medfield, MA · Member since 2014 · 28 posts · 4 votes
    11y

    It's not something that investors can really take advantage of in the long run, because as far as I know it's only available for first time homebuyers. But it's a good start I think. There are limits though. Your annual income cannot exceed 81,000 for a single family home, or 121,000 for a Multi. I think.

    0Reply
  • Jay Phillips
    Manhattan, NY · Member since 2012 · 44 posts · 31 votes
    11y

    Minimum down payment for the no mortgage insurance program for multifamily is 5% as I remember.

    0Reply
  • Christopher Johanson
    OP
    Investor · Medfield, MA · Member since 2014 · 28 posts · 4 votes
    11y

    5% is totally doable

    0Reply
  • Samuel Getant
    Commercial Real Estate Broker · Worcester, MA · Member since 2014 · 38 posts · 6 votes
    11y

    Now is that total household income or or just personal income?

    0Reply
  • Christopher Johanson
    OP
    Investor · Medfield, MA · Member since 2014 · 28 posts · 4 votes
    11y

    It refers to income of anybody who is on the application. For example, if you and a partner are applying together, and you both make 80,000/yr, you wouldn't qualify because you make too much. 

    0Reply
  • Jay Phillips
    Manhattan, NY · Member since 2012 · 44 posts · 31 votes
    11y

    The income limit in Worcester County is around $107K.   $122K in Norfolk and Middlesex.

    0Reply
  • Sean LeBlanc
    Lender · Salem, NH · Member since 2014 · 46 posts · 23 votes
    11y

    Chris,

    I work for one of the largest Mass Housing lenders in the state, so maybe I can shed some light here:

    Mass Housing is an awesome program. 3% is their minimum down payment on single families, but that jumps up to 5% for multis, usually with no mortgage insurance. Keep in mind that the mortgage insurance is essentially built into the interest rate, which is why it might look a bit higher. However with FHA, your mortgage insurance is not only expensive (1.35% of loan amount), but it lasts for the LIFE OF THE LOAN. So regardless of equity position, you will have mortgage insurance, unless you refinance.

    Like others have mentioned, Mass Housing has income limits, and you must be a first time homebuyer. The income limit for Worcester County right now is $107,460 .

    There is also first time home buyer education requirements, and if you are buying your first multi, there will be a landlord education requirement as well. The good thing is most of these classes are offered online these days.

    You mentioned that MA Housing also allows you to use 65% of rents on a triplex to qualify, keep in mind this is only if the units are occupied at the time of purchase. If they are vacant, you can use 50% of the market rents set by the appraiser. With FHA, you can acutally use 85% of the market rents to qualify, another big reason why people choose FHA.

    Feel free to contact me anytime if your looking for more info or want to know if you might be eligible.

    Thanks,

    2Reply
  • Mike HurneyPro Member
    Real Estate Investor · Boston, MA · Member since 2009 · 2k+ posts · 542 votes
    11y

    @Christopher Johanson  We do a lot of those MassHousing loans also, I think they're great for someone starting out!

    And don't forget the FHA has an Up Front MI (UFMI) of 1.75%

    0Reply
  • Kemar White
    Investor · BOSTON, MA · Member since 2018 · 5 posts · 1 vote
    8y

    @Sean LeBlanc Interested in getting a multi with masshousing as well, do i actually have to live in one unit for the life of the loan as i have read online???. What if i wanted to get a single family or another multi thru FHA after a couple years or so what would happen with my masshousing mortgage??

    0Reply
  • Alexander George
    Rental Property Investor · Greater NYC Areas, NY · Member since 2014 · 50 posts · 11 votes
    8y

    Just to piggy back... Is it possible to acquire the first with MassHousing and a Second with FHA?

    1Reply
  • Kimberly Ciaramicoli
    Member since 2018 · 1 post · 0 votes
    7y

    @Alexander George, did you arrive at an answer to your question? I'm wondering the exact same thing . . . 

    0Reply
  • Alexander George
    Rental Property Investor · Greater NYC Areas, NY · Member since 2014 · 50 posts · 11 votes
    7y

    @Kimberly Ciaramicoli No I have not!! Any updates on to this would be great, as it is now 2019. I believe some of the terms discussed about MassHousing have since changed.... 

    0Reply
  • Alexander George
    Rental Property Investor · Greater NYC Areas, NY · Member since 2014 · 50 posts · 11 votes
    7y

    @Sean LeBlanc Are you still working with a MassHousing related lender? I would like to get some questions answered about the program. Thanks.

    0Reply
  • Sean LeBlanc
    Lender · Salem, NH · Member since 2014 · 46 posts · 23 votes
    7y

    Hi All, 

    Sorry for my absence on this thread, getting back into BP.  

    @Kemar White you do not need to live in the house for the life of the loan, the guideline states you must INTEND to live in the property for at least 1 year. 

    @Alexander George

    The reason you can't go rack up rentals by moving into them using FHA loans is there is a rule that in most situations you can only have one FHA loan at a time.

    If your goal is to house hack a few properties in a row to build up your portfolio, it can be done, but you need to be strategic with your loan programs. 

    Masshousing offers both conventional and FHA programs with varying terms. You could theoretically use an FHA loan for your first property, then a conventional loan for your second. By the time your ready for your third, you may be able to refinance your original FHA loan into a conventional loan, and then you would be eligible to use an FHA again on the third property.

    As you can see there is a lot of red tape to navigate, if this is your plan, you need to make sure you are dealing with a lender who understands this strategy. 

    Let me know if I can help out in any way.

    Thanks!

    3Reply
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