Mass. real estate market has changed. But is it better for buyers?

First-time homebuyers should not give up hope, according to Ashley Brennan, real estate agent since 2011 who is currently affiliated with Gibson Sotheby’s International Realty in Hingham.

Unlike the real estate market of 2020 and 2021, which was like no other Brennan has seen due to the pandemic, the current market is far more navigable for first-time homebuyers, she said.

“We aren’t seeing the frenzy of multiple offers that first-time homebuyers were losing out on because of (offering) lower down payments,” said Brennan.

She also said that because the average number of days on the market for listings is longer (155, currently compared to just 38 at this time last year), buyers have more time to make educated decisions and can benefit from price reductions — which often happen as the number of days a property is on the market increase.

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How buyers can stand out in multiple offer situations

Sellers typically favor those who are poised to make a 20% down payment in a multiple-offer situation, said Brennan. For example, if a first-time buyer makes an offer of $500,000 on a home, having $100,000 to put down makes the deal more enticing.

Another way buyers can stand out include increasing their offer, tightening the closing date, tightening the inspection time frame or waiving the inspection altogether.

Brennan said another way to win a bid is for buyers to agree to lease back if it helps the seller. They can also have a shorter time frame for the mortgage commitment or agree to pay the difference or a portion if the property doesn't appraise out.

Another way to make an offer more appealing to a seller is to agree to take the property in "as is" condition."

Financial help for first-time buyers

If a first-time homebuyer qualifies for a USDA loan, they do not need to put any money down. FHA requires 3.5% down ($17,500 for a $500,000 purchase) and MassHousing requires 3% (or $15,000 for a $500,000 purchase), according to Brennan.

Thomas Farmer, communications specialist with MassHousing, said there are a number of mortgage options for first-time buyers such as down payment assistance and mortgage insurance that provides up to six months of principal and interest payments in the event of job loss.

If you earn less than $179,955 annually and are looking to buy a single-family home, condominium or multifamily property to be your primary residence, you are eligible to apply for MassHousing mortgage loans and down payment assistance.

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How to qualify for first-time homebuyer loan

To qualify for a first-time homebuyer mortgage, Jim Brown, senior loan officer with GuaranteedRate, said the buyer must have not owned a home for the last three years.

Their debt-to-income ratio should be about 43/50, meaning that one's monthly housing debt should be 43% or less of monthly gross income.

Monthly housing debt plus all other monthly debt should not exceed 50% of the first-time homebuyer's gross monthly income.

To get preapproved, borrowers should contact a loan officer. Each program has specific guidelines, said Brown.

Success stories

MassHousing has many success stories of first-time homebuyers. One is Arlyce Porcher Joseph, who recently purchased a home for her family in Brockton using a MassHousing mortgage loan and grant from MassDREAMS, which covered the down payment, mortgage insurance and closing costs and also allowed her to lower the interest rate on the mortgage loan.

Funding for the MassDREAMS program through MassHousing has been expended, although grants are still offered through Massachusetts Housing Partnership’s lending programs. According to Farmer, MassDREAMS grants delivered up to $50,000 in direct assistance for buyers with household incomes below 100% of area median income and $35,000 for households with incomes between 100% and 135% of the area median income. The program was funded through a $65 million legislative appropriation of ARPA state and local fiscal recovery funds and provided grants to more than 1,100 borrowers.

Kate Wood, a real estate agent with the Steven Cohen team at Keller Williams Realty in Boston, said she was able to help three clients buy their first homes thanks to the MassDREAMS program in Everett, Malden and Dorchester.

Joe Smith, senior vice president with CrossCountry Mortgage, LLC, in Boston, has also been able to help first-time buyers though the MassDREAMS program. He said it was “tantamount to every eligible borrower winning the lottery."

“For agents who realized the potential for their buyers, it was likely the biggest lead generating opportunity of 2022,” said Smith.

Find program that fits your needs

Brown said some programs for first-time buyers are a better fit than others. His go-to’s are FNMA Homeready, FMLMC Homepossible, MassHousing and FHA.

Income limits, the town in which buyers intend to live and their credit scores are three key factors that come into play when looking for a loan, he said.

He said first-time buyers should call a qualified lender to go over the funding programs to see which one is the best fit for them. There are programs with funds for down payment and closing costs, but the funds on these need a signed purchase-and-sales agreement and the funds in these programs can run out pretty quickly because they are such a good deal, he said. To see the complete list of qualified lenders, visit MassHousing.

Brown recommends buyers be preapproved and ready due to the continued low inventory of housing stock. At press time, mortgage rates were hovering between 6.3% and 6.5% for a 30-year fixed mortgage, according to Brown.

“We also have attorneys that discount the closing costs for first-time homebuyers,” he said.

Refinance down the road

Brennan advises buyers to "marry the house and date the rate."

“Buyers need to realize that they are paying less for properties but are locking in higher interest rates with the opportunity to refinance down the road, in the end potentially spending less overall,” she said.

Also, she said those who take advantage of a first-time buyer program will have access to lower rates and are potentially unaffected by rate increases over the past year.

This article originally appeared on Telegram & Gazette: Mass. housing experts say there's hope for first-time buyers