Shopping for lenders
Ensuring that your mortgage company is licensed is very important 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
This will give you a general idea of market pricing and can help you narrow down the list of lenders to contact. 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 cautious of doing business with a company that is offering rates that are much 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 their licensing by visiting the Division of Banks' website for licensing information or by calling 1-800-495-BANK (2265), or by calling 1-800-495-BANK (2265).- Mortgage lenders: Home loans are available from several types of lenders, including 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 can also act as brokers, so when you are deciding whether to use their services, you should ask if they will be acting as a lendor or broker.
- Mortgage brokers: 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 for you, he or she may not necessarily offer the best mortgage products that may be available to you. If you choose to work with a broker, find out how that broker is being paid and compare the broker’s fees with other brokers. You may decide to do 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 an idea 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 about 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 run your credit report. The process of asking for your credit report will also appear on that report. If requests happen 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 want 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 working 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 get the attorney’s fee information and determine how much legal representation you need before going further in the process of getting a mortgage. - 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. Usually, nothing else will be charged until you have indicated to the lender that you plan to proceed with the loan. Review all estimates thoroughly. - Get your rate lock commitment in writing
If you choose to lock an interest rate, make sure that the rate lock commitment is in writing and that you keep a copy. 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 do this. A mortgage broker, however, can get 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 on time
Throughout the mortgage application process, provide all required documentation to your lender or broker on time and well before the rate lock expires. Get 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.
Call the Division of Banks at 1-800-495-BANK (2265) x 501 immediately with any questions or problems regarding rate lock commitments . Visit the Department of Housing and Community Development's (DHCD) First Time Home Buyer's Program for help in navigating the homebuying process. MassHousing provides down payment assistance, as well as a variety of other programs for eligible homebuyers.
Additional Resources
Using a real estate agent
What you need to know:
- Real estate agents and brokers are licensed by the Board of Registration of Real Estate Brokers and Salespersons
- A real estate agent can estimate how much a property is worth by using similar properties in the area to 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.
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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 4 units). While home inspections are not a guarantee that there are no problems with a 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 come up.
Home inspectors will inspect the parts of the structure of the home that are easy to see and get to, as well as the plumbing, heating/air conditioning, 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 is anyone under the age of 6 years old living there.
Make sure you know the date when the bathrooms and kitchens were last updated, as home insurance policy premium rates and the likelihood of a claim may depend on this information.
The inspection process
Home inspectors look at the visible parts of the structure of the home, including the roof, the attic, walls, windows, ceilings, floors, doors, basements, air conditioning, plumbing, electrical systems, and the foundation. Home inspectors don't have to point out every minor or cosmetic flaw they notice, as the buyer should be able to notice these without the help of a professional.
While some home inspectors are qualified to offer additional inspections and tests, extra tests are not part of the basic home inspection. These include testing for lead paint, water quality, wood destroying insects, air quality, including radon gases, and fungi or mold. You may want to consider hiring qualified licensed professionals of your choice to complete these tests.
It is recommended that the buyer be present when the home inspection is happening. This will give the buyer a chance to observe the inspector, ask questions directly and have a good idea of the condition of the home.
When to have an inspection
Most home inspections take place 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.
How to find a home inspector
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 salespeople 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 getting information on licensed home inspectors.
The Board of Registration of Home Inspectors within the Division of Occupational Licensure licenses home inspectors. The board is responsible for ensuring that licensed home inspectors have the necessary training and experience through an education program and meet minimum inspection requirements in each inspection performed.
Additional Resources
Getting homeowners insurance
Homeowner's insurance provides coverage in the event of the loss of or damage to your home. In most cases, your mortgage lender will require you to have homeowner's insurance.
Additional Resources
Foreclosure
When you miss mortgage payments and default on your loan agreement, lenders may take measures to protect their interest in the defaulted property. This may include starting the foreclosure process. Learn about your rights and foreclosure regulation in Massachusetts.