Homeownership for Consumers in Massachusetts

Borrowing money to purchase a home is a complex process. While working through the home buying process consumers will need to at least involve a mortgage broker/bank/lender, Title Company and an appraisal company. Buying a home is the biggest purchase a consumer will make in their lifetime, and understanding the process is crucial to making an informed decision. Consumers may use these steps as a guide for the home buying process in Massachusetts.

When applying for a mortgage there are two basic types of interest rates consumers will receive, either a fixed rate mortgage or Adjustable Rate Mortgage (ARM). Fixed rate mortgages have interest rates that do not change throughout the life of the loan. ARMs are variable rates, meaning the rate changes periodically during the life of the loan. For example, a 5/2 ARM means the interest rate remains fixed for 5 years, but changes every 2 years then after.

A loan term is how long a consumer has to pay off his/her loan. For example, common loan terms for mortgages are 30, 20 or 15 years.

The type of mortgage a consumer will receive is based their individual situation. There are different types of mortgages available.

  • Conventional Mortgages are loans that are not guaranteed or insured by any government agency and are typically fixed in its terms and rate.
  • FHA Loans are mortgages are offered by the Department of Housing and Urban Development and Insured by the Federal Housing Administration. Consumers opting for an FHA Loan pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan.
  • Special mortgage loan examples include but are not limited to USDA Loans, VA Loans and Jumbo Loans. Most special loan programs are restrictive and consumers have to meet certain requirements such as veteran status or income levels.

In order to gauge how much a consumer is able to spend when purchasing a home, they should contact a bank, credit union, mortgage lender or mortgage broker to find out how much can be borrowed given the consumer's income, periodic obligations, down payment and credit history.

The difference between a broker and bank, or lender, is that a broker originates a loan but only to be funded by a bank or a lender; whereas a bank/lender both originate a consumer loan application and funds the loan.


The bank, credit union, mortgage lender or mortgage broker issues consumers with a prequalification letter showing the amount of loan the consumer is qualified to borrow. A property with a specific address is not required in order to be prequalified for a mortgage loan.


Shopping for a home once a consumer has obtained a prequalification letter can relieve a lot of stress knowing the amount of the mortgage loan the consumer is qualified to borrow. Searching for prospective homes to buy can be the fun part of the process. There are many websites available for aid consumers in their home search.

The U.S. Department of Housing & Urban Development (HUD) has also developed a Home Buying Wish List, which can narrow down "must have" features in a new home, and a Home-Shopping Checklist to help compare homes when looking for a new home.


A formal loan application is required once a consumer finds the home they would like to purchase. The consumer's bank, credit union, mortgage lender or mortgage broker may ask consumers if they would like to lock the rate offered at the time of application or "let it float". Consumers choosing to lock the rate means that the interest rate quoted will remain the same until the loan is closed; whereas a floating rate may change (higher or lower) as the interest rate in the market changes between the date of application and date of closing.


Before a consumer signs any legal documents or contracts an attorney should be consulted to review the documents. Consumers should consult an attorney throughout the home buying process to ensure all deadlines and requirements are met in order to reach the final purchase stage.


Once a consumer has found a home that fits their budget and other wants/needs, an offer should be made on the property. The offer will include the amount of money the consumer wants to pay for the property and can often include other information such as property inspections. An offer is a legally binding contract and an attorney should be consulted prior to a consumer submitting into any contract.


Once the offer has been accepted by the buyer, the consumer will have to sign a contract (Purchase and Sale Agreement). A Purchase & Sale Agreement (P&S) is a legal document prepared and agreed to by attorneys representing both the buyer and seller in the home purchase transaction. The P&S is signed by both the buyer and seller, and will include final sale price and all terms of the purchase. The P&S is a legally binding document and an attorney should be consulted prior to entering into any contract.


Consumers must provide all documents requested by their lender in a timely fashion, making sure to meet all deadlines in the Purchase & Sale Agreement (P&S). Documents which a lender will request may include but are not limited to tax returns (2 years), latest pay stubs, and income and employment verification.


Within three days of receiving an application, the lender will issue disclosures, including the Loan Estimate. The disclosures help consumers understand your rights and the cost of the mortgage loan. The Loan Estimate provides consumers with interest rate and closing cost details; the Loan Estimate will also help consumers shop around for a mortgage loan that has a better term and rate.


When a consumer receives the "clear to close" message it generally means all conditions of the loan have been met. Once a "clear to close" message has been issued, the mortgage lender prepares all the documents and sets to wire the funds in order for the mortgage loan to close.


Coordinate the closing date with the lenders settlement agent, the seller and attorneys. Closing documents will be signed when all parties agree to meet and the consumer signs legally binding documents to purchase the home.


After a consumer signs the mortgage paperwork, the mortgage loan servicer may or may not be the same company which financed the loan. There is a likelihood of consumer mortgages being sold to other lenders. Most mortgages are sold into the secondary market; lenders rarely keep the mortgages they make.

While the mortgage lender is the financial institution which financed the mortgage loan, the mortgage servicer manages the loan by processing monthly loan payments, responding to inquiries, keeping track of principal and interest payments, and managing the escrow account (if applicable).