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Alternative to FHA Financing: MassHousing

By Keith Pentz

Real Estate Agent with RE/MAX ADVANTAGE 1 MA #9526832

December 16, 2010 09:11 AM

FHA Changes

Earlier in the year FHA did away with their spot approval process.
Then they increased (almost doubled!) their monthly Mortgage Insurance.
Now 45,000 condo associations that were previously FHA approved have expired.

What does that mean for the state of Condo Financing in MA?

Well, there are alternatives, and one that we rely on day in and day out in Massachussets is using MassHousing. In many cases it is a better program for your clients than FHA, whether it is a condo, Single or Multi Family!

What are the basics of MassHousing for Condos?

*They do not have a minimum number of units in the complex (FHA must be 4 or more)
*FICO Requirements are 640 for 20% down, 660 for 5% down and 680 for 3% down.
*Debt to Income ratios are 41% to 45% depending on down payment.
*Existing developments must be 50% owner Occupied.
*Exposure is limited to 20-25% in the development (won't finance 2 units in a 4 unit complex)
*Since this is a MyCommunity product the down payment CAN be 100% gift OR Community Second OR Down Payment Assistance.
*The Mortgage Insurance is issued by MassHousing, so if they qualify for the mortgage, they qualify for the MI.
*The Mortgage Insurance is 1/3 to 1/2 CHEAPER than FHA.
*There is no Upfront Mortgage Insurance added to the loan.
*The Mortgage Insurance can be paid off up front (Single Premium paid at closing).
*MassHousing services 100% of their loans, meaning the loan will NEVER be sold to another servicer.
*MassHousing MI will pay the Mortgage Payment for up to 6 months in case of financial hardship including job loss.

This is not designed to make you an expert on MassHousing, but to make you aware there are alternatives out there to FHA in Mass. Below is an example of financing with MassHousing (condo or single Family) with 3% down Versus FHA.

$250,000 Purchase with 3% Down

Product       FHA                    MassHousing with MI         MH with Single Premium
Down Payment                                $8750                          $7500                                    $7500
Total Loan Amount                          $243,662                      $242,500                               $242,500
Rate                                                5.0%                           5.25%                                    5.25%
Additional Closing Costs                     0                                  0                                         $6062
Monthly Principle and Interest          $1308                          $1339                                    $1339
Monthly Mortgage Insurance            $183                            $121                                      $0
Principle Interest and MI                 $1491                          $1460                                     $1339

Note that MassHousing is only avaialble in Massachusetts. To locate a Housing Finance Agency in YOUR STATE please visit:

http://www.ncsha.org/housing-help

If you would like a referral for a Loan Officer outside of MA that has access to these programs please contact me. Prospect operates in all 50 States and I would be more than happy to help set you up with a local expert!

Hope you find this information helpful and be sure to remember that there are alternatives to FHA for your Condo financing needs!

Thanks and have an AWESOME week!

KP

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Phil & Celeste Pafford

PaffordHomes.com, Corona CA - Corona, CA

Corona Short Sale Broker

Interesting... "the loan will NEVER be sold to another servicer" It sounds like they can still sell to an investor as long as they "service" the loan.

In today's short sale world, the investor still has the final say. I've never heard of "mass housing", I wonder if it will make it out here to sunny CA? ;-)

Dec 16, 2010 10:49 AM

David Cahill

Century 21 Cahill Associates - Boston, MA

Thanks for sharing! I've done a few MassHousing deals in the past year and they are a great alternative to FHA!

David in Boston

Dec 16, 2010 11:06 AM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Keith.. some good information... but one thing that some will fail to realize, it does come down to your credit scores. I bring this up because I have written several posts in which I have stated that cash is king. I would rather see a client put 3 to 5% down than 20% down, especially if that is all they have.

Few questions... if I would put 20% down, do I still have MI? And you listed debt to income rations. Is this for front end? Back end? When it comes to the single premium MI, do you have to have a minimum credit score? Lastly, in my opinion, saying that the FHA MI almost doubled is kind of pushing it. 35 bps more to be exact. Almost doubled would be like 47 to 49 bps. Hey, not trying to knock the program, but I guess I am a stickler when someone does comparisons and uses certain terms and or phrases.

Overall.. some good info... I just like looking at these kinds of comparisons from all angles, no matter what may seem better on paper. Thanks

jeff belonger

Dec 16, 2010 04:34 PM

Fernando Herboso - Associate Broker MD, & VA

Maxus Realty Group of Samson Properties - Clarksburg, MD

301-246-0001 Serving Maryland, DC and Northern VA

Learning the hard way.. .is killing one of my deals as we speak. .

Dec 16, 2010 11:40 PM

Keith Pentz

RE/MAX ADVANTAGE 1 - Shrewsbury, MA

Keith Pentz

Phil and Celeste- here is the link to CA Financing.

http://www.calhfa.ca.gov/ I will give them a call and see what programs they have. I know they have an affordable housing program at the very least.

DC- glad you use them! They are great and you have a great REP in Boston!

Dec 17, 2010 01:45 AM

Keith Pentz

RE/MAX ADVANTAGE 1 - Shrewsbury, MA

Keith Pentz

Jeff- you have an awesome blog!! I agree, cash is KING. We do alot of USDA but for the more Metro areas where that is not available we turn to MassHousing

If you put 20% down there is NO MI with MassHousing. Ratios are back end... 41% for 97% LTV and a 45% for <97% LTV.

Single Premiuim does not have a FICO requirement other than the program requirements- cost is 2.5 for 95.01-97% LTV, 2 for 90.01-95% LTV, 1.5 for 85.01-90% LTV and 1 for less than 85% LTV.

FICO requirements are 680 for 97% LTV, 660 for 80.01-95% LTV and 640 for less than 80%. 700 Credit score for 3-4 Families.

I agree at looking at programs from all angles! We never pick the loan program for our clients. We lay out the options and give our informed opinion and let them choose what they think is best for their needs. Looks like you have a great product palate for your clients to choose from!

Dec 17, 2010 02:19 AM

Keith Pentz

RE/MAX ADVANTAGE 1 - Shrewsbury, MA

Keith Pentz

Fernando- sorry you are having challenges. What are the issues you are running into?

Dec 17, 2010 02:20 AM

Joetta Fort

The DiGiorgio Group - Arvada, CO

Independent Broker, Homes Denver to Boulder

It's good to have options, when the path everyone else trods isn't working and you come up with solutions you stand out. In a good way!

Dec 17, 2010 02:38 AM

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

Keith.. thanks for the compliments. I just like to pick things a part, as you can see. Because another thing when comparing FHA with the MassHousing program.. you can still deduct MI or PMI up until 12/31/10. Not sure if this would be extended... but this would have to go into your monthly savings per se and not just showing the lower monthly payment. And I guess when writing posts like this, I try to talk about it all, to get the best possible picture. I know many states have these kinds of programs and they can be very good for someone. And I wasn't referring to cash is king in regards to USDA loans... just that I am talking about putting 20% down as opposed to putting 3.5% down or so. You can't compare this scenario to the program that you mentioned,because apparently there are no pricing hits. But I have compared those with 639 credit scores and 20% down and most would think going Conventional would be the way. It depends on your goals... but you more in likely would be better off with a FHA loan...even with 20% down and paying MI. Hence why i think that person would be better off putting less down then... but it also comes down to the monthly payment that you are comfortable with. Thanks for answering my questions.

jeff belonger

Dec 17, 2010 02:42 AM

Keith Pentz

RE/MAX ADVANTAGE 1 - Shrewsbury, MA

Keith Pentz

Great points Jeff! I appreciate having it picked apart..great point on no LLPAs as well. Your points are going to get incorporated in my handout for loan comparisons as they are spot-on.

As far as giving ALL the info I can, for me personally I will go on for 27 pages and have had to cut down my ramblings (at the request of numerous Realtors sitting across from me nodding off..you know who you are!). Always a balancing act between giving the 30,000 foot view and the microscope one...great blog topic though on comparing ALL the options that are out there for various FICO scores and their pros and cons...

Thanks for the feedback!

Dec 17, 2010 02:52 AM

Keith Pentz

RE/MAX ADVANTAGE 1 - Shrewsbury, MA

Keith Pentz

I couldn't agree more Joetta! The more options we are aware of at the start the more control we can keep over our transactions when they start running off the rails...

Dec 17, 2010 04:41 AM

Tom Waite

Thomas Waite Real Estate Broker - Cypress, CA

So Cal-Apartment Bldg Investments

Keity! The REASON FHA insurance has gone up so much is..................

................................................

...............................................................wait for it............

FHA and the USA lost a CrapLoad of money financing condos!

When MasHousing is Busted...contact Jerry Brown of CA...where I reside and work!

Dec 17, 2010 04:44 AM

Marte Cliff

Marte Cliff Copywriting - Priest River, ID

Your real estate writer

It's always interesting to me to see what different states do to assist their citizens. We never see any of this in the national news.

Dec 17, 2010 05:30 AM

Keith Pentz

RE/MAX ADVANTAGE 1 - Shrewsbury, MA

Keith Pentz

Tom- save me a seat...I can use some sunshine either way!

Marte-unfortunately good news doesn't cut it...that's why Active Rain is so great to get the good word out!

Dec 17, 2010 06:41 AM

Sharon Parisi

United Real Estate Dallas - Dallas, TX

Dallas Homes

Thanks for sharing this valuable information.

Dec 17, 2010 03:45 PM

Keith Pentz

RE/MAX ADVANTAGE 1 - Shrewsbury, MA

Keith Pentz

Thanks Sharon! Glad you liked the post...

Dec 18, 2010 05:03 AM

Gene Riemenschneider

Home Point Real Estate - Brentwood, CA

Turning Houses into Homes

It would be nice if we had something like this in California. Condos are taking a big hit.

Dec 18, 2010 01:05 PM

Keith Pentz

RE/MAX ADVANTAGE 1 - Shrewsbury, MA

Keith Pentz

Gene- yeah, I know Cali is getting hammered when it comes to condos- Did you know that you can sometimes get a "limited review" on a condo with a larger downpayment? Depending on the strength of the borrower, if you increase the downpayment (10% down or more), you can get around some budget issues, investor concentration etc...won't help in all cases but it is something to be aware of when your transaction becomes challenging..

Dec 20, 2010 06:02 AM

Pam Crawford

RE/MAX Professional Associates - Auburn, MA

Owner-RE/MAX Prof. Assoc.,MBA, CDPE, CRS, ABR

It's nice to know there are alternatives. Thanks for the post

Dec 23, 2010 01:55 AM

Keith Pentz

RE/MAX ADVANTAGE 1 - Shrewsbury, MA

Keith Pentz

My pleasure Pam! Hope to have a few more products by the end of January to roll out as well..stay tuned!

Dec 25, 2010 01:42 PM