Shopping for Lenders
Ensuring that your mortgage company is licensed is crucial when buying a new home. If a company is licensed, they have met all the requirements and regulations of the state, and are established as a legitimate lending institution.
If you are in the market for a mortgage or are refinancing your home:
- Do a broad search online for interest rates in your area. Running a broad search online for rates in your area will give you a general idea of market pricing and can help you narrow down the list of lenders to approach. A helpful tool for running a general search can be found on the Consumer Protection Bureau’s website. Lender information is often found on specific lenders’ websites. Be wary of a company that is offering rates significantly lower than its competitors.
- Confirm that your mortgage lender and broker are licensed. Both mortgage lenders and mortgage brokers must be licensed in Massachusetts. Verify that mortgage lenders and/or mortgage brokers are licensed by visiting the Division of Banks' web site for licensing information at https://www.mass.gov/lists/download-a-list-of-approved-licensees or by calling 1-800-495-BANK (2265), or by calling 1-800-495-BANK (2265).
- Lender: Home loans are available from several types of lenders — thrift institutions, commercial banks, mortgage companies, and credit unions. The mortgage lender will determine whether, and in what amount, you qualify for a loan. Lenders also have the ability to act as brokers, so you should ask in what capacity they will be acting when you are deciding whether to use their services.
- Broker: Mortgage brokers do not lend money directly. Their job is to find you a lender. Such brokers have access to several lenders, which can mean a wider selection of loan products from which you can choose. Although a broker is working on your behalf, he or she may not necessarily offer the best mortgage products that may be available to you. If you choose to deal with a broker, find out how that broker is being compensated and compare the broker’s fees with other brokers. You may ultimately decide to conduct your own research and save money by eliminating the need to pay a broker’s fee.
- Get preapproved. Being preapproved and being prequalified for a loan are not the same. While a prequalification will give you a sense of how much money you may be eligible to borrow, it is not an offer. Prequalification is based solely on information you supply. The preapproval process, on the other hand, is more official. The lender requests and receives from you, the applicant, more documentation related to your financial status, employment and credit history. Although preapprovals are valid for a period of time, they often contain other conditions that you must meet before final approval for the loan is given. When you apply for a loan, the lender will pull your credit report. That inquiry of your credit report will also appear on your credit report. If this happens too often in a short period of time, your credit history and score may suffer. But for a major purchase, such as a home, the lenders who are seeking to review your credit history are potential creditors. If their inquiries are within a short time period, typically within two weeks, collectively those inquiries will count as one hard inquiry rather than multiple inquiries.
- Hire an attorney, if possible. Hiring your own attorney may be in your best interest as he or she can assist you in the different stages of the homebuying process, from dealing with the seller to reviewing the purchase and sale agreement, mortgage documents and closing documents. If you choose to hire an attorney, make sure to ask whether he or she has experience representing home buyers. Always obtain the attorney’s fee information and determine the extent of legal representation you need at the outset.
- Submit loan applications to at least three lenders. Submitting multiple applications may save you money in the long run. When you apply for a loan, the lender can charge you an application fee for pulling your credit report. Generally, nothing else will be charged until you have indicated to the lender your intent to proceed with the loan. Review all estimates thoroughly.
- Get your rate lock commitment in writing. If you choose to lock an interest rate, ensure that the rate lock commitment is in writing and that you retain a copy of the commitment. Ask whether the commitment is from the actual underwriting lender. Do not accept a rate lock commitment from a mortgage broker.
- Verify that your rate lock commitment is from the mortgage lender, bank, or credit union. Remember that only mortgage lenders, banks, and credit unions are authorized to issue rate lock commitments. Mortgage brokers are not allowed to issue rate lock commitments. A mortgage broker, however, can obtain/arrange a rate lock in writing from the actual underwriting lender. Ask your mortgage broker to provide you with a copy of the rate lock commitment from the underwriting lender.
- Provide all documentation to your lender or broker in a timely fashion. Throughout the mortgage application process, provide all required documentation to your lender or broker in a timely fashion and well before the rate lock expires. Obtain a copy of the Settlement Statement before closing.
- Contact your lender or broker often throughout the mortgage application process. Call your lender or broker regularly during the mortgage application process to verify that the transaction is progressing smoothly.
Remember, a lender is expected to honor a rate lock commitment if it expires through no fault of the borrower, regardless of whether a delay was caused by either the lender or by its agents.
Immediately call the Division of Banks with any questions or problems regarding rate lock commitments at 1-800-495-BANK (2265) x 501. Visit the Department of Housing and Community Development's (DHCD) First Time Home Buyer programs for help in navigating the homebuying process. MassHousing provides down payment assistance and a variety of other programs for eligible homebuyers.
Using a Real Estate Agent
Real estate agents and brokers are licensed by the Board of Registration of Real Estate Brokers and Salespersons.
A real estate agent can provide a comparable valuation of the property by using similar properties in the area and negotiate the purchase and sale agreement.
A real estate agent cannot maintain escrow accounts or provide legal advice.
A real estate agent may represent both the buyer and the seller. To do so, the real estate agent must provide dual disclosure to both parties and have their written consent.
Getting a Home Inspection
A home inspection is the visual examination of the physical structure and major interior systems of a residential dwelling (up to four units). While home inspections are not a guarantee that there are no problems with your home and they are not intended to provide buyers with protection from all the risks involved, they are generally recommended when buying a new home to help make the buyer aware of any existing or future problems that may arise.
Home inspectors will inspect readily accessible exposed portions of the structure of the home as well as the plumbing, heating/AC, and electrical systems. If the house was built before 1978, the owners are required to notify buyers of lead risks. Under Title 5, the owner must disclose if there is a septic tank and if so, report its condition. A homeowner is also required to remove lead paint if there are inhabitants under the age of 6 years old.
Make sure you know the date when the baths and kitchens were last updated because home insurance policy rates may depend on it. Policy premium rates and the likelihood of a claim may depend on the age of the baths and kitchens.
The Process: Home inspectors look at the exposed portions of the structure of the home, which includes the roof, the attic, walls, windows, ceilings, floors, doors, basements, air conditioning, plumbing, electrical systems, and the foundation. Home inspectors have no obligation to point out every minor or cosmetic flaws they notice as these should be apparent to the buyer without the aid of a professional.
While some home inspectors are qualified to offer additional inspections and tests, these tests are not part of the basic home inspection. This includes test for lead paint, water quality, wood destroying insects, air quality, including radon gases, and fungi or mold. You may want to consider contracting these tests through qualified licensed professionals of your choice.
It is recommended that the buyer be present when the home inspection is underway. This will give the buyer an opportunity to observe the inspector, ask questions directly and have a good idea as to the condition of the home.
When to Hire One: Most home inspections occur right after the purchase offer contract is signed, before the purchase is finalized. It’s usually recommended that the prospective buyer put an inspection clause in the contract making the purchase obligation contingent upon the findings of the home inspection. This clause should specify the terms to which both the buyer and seller are obligated.
Where to Find One: One of the easiest ways to find a home inspector is to ask friends and family. You can also get referrals from online sources that offer reviews. Real estate brokers and salesmen may not directly recommend a specific home inspection company or home inspector unless representing the buyer as a buyer's broker. Brokers, however, may provide assistance to buyers in accessing information on licensed home inspectors.
The Board of Registration of Home Inspectors within the Division of Professional Licensure licenses home inspectors. The Board is responsible for insuring that licensed home inspectors have proper training and experience through an education program and meet minimum inspection requirements in each inspection performed.
Obtaining Homeowners Insurance
Homeowner's insurance provides coverage in the event of the loss of your home or damage to your home. In most cases, your mortgage lender will require you to have homeowner's insurance.
When you miss mortgage payments and default on your loan agreement, lenders may take measures to protect their interest in the defaulted property. Measures may include starting the foreclosure process. Learn about your rights and foreclosure regulation in Massachusetts.