The FHA Loan
Many people have heard about the Massachusetts FHA loan program, but few understand the advantages of obtaining a loan through the Federal Housing Administration and the criteria that must be met before a household becomes eligible to take advantage of the program. However, with housing prices as reasonable as they are currently, it's a good idea to familiarize yourself with the program and, if eligible, take advantage of it. Eligibility for the Massachusetts FHA home loan program is possible if you meet the following criteria:
- You have worked two years of steady employment, preferably with same employer.
- For the last two years, your income should have been steady or increasing.
- Your credit report should indicate that of all your debt payments, you made less than two late payments in the last two years. Each late payment should be less than thirty days late.
- Bankruptcies must be at least two years old, and all the credit you've established since then should be favorable.
- Foreclosures must be at least three years old, and all the credit you've established since then should be favorable.
- Your new mortgage payment should be approximately 30% of your gross income.
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The Massachusetts FHA loan program, along with the FHA program in every other state in the country, is administered by the Federal Housing Administration. Since the FHA is a government agency, the administration doesn't actually provide loans directly to consumers, but instead provides a guaranty to banks who then extend the FHA loan terms to their customers. Because banks have an added sense of security due to the guaranty, Massachusetts FHA loan terms are often quite advantageous to borrowers, who can choose from both adjustable rate and fixed rate options.
The down payment required on an FHA loan is only 3.5%, meaning that even buyers who aren't able to save a large sum of cash can purchase a home. Additionally, the credit requirements are not as stringent as traditional home loan programs, and even those who have credit problems or merely insufficient credit can qualify for a loan.
Massachusetts FHA Loan Limits
Massachusetts FHA loans are capped at a certain amount, however, and the maximum loan amount varies from county to county based on the cost of living in each area. The baseline maximum (which is set each year according to median housing prices) for 2009 is $271,050 for a single family dwelling, but many counties and cities in Massachusetts have a higher maximum due to cost of living increases. Check with your lender for more information.