The online real estate database Zillow rates the current housing market in Massachusetts as “healthy,” with the state scoring 5.7 out of a possible 10 points on the company’s Market Health Index. The median listing price in Massachusetts stands at $439,900, while the Zillow home value index is $401,500.
Those figures are significantly higher than the national median listing price of $275,000 and a home value index of $220,100. Those numbers also represent a roughly 21 percent increase in Massachusetts home values over the last three years, and Zillow estimates that the state’s average home value will rise another 9.1 percent over the course of the next year.
Mortgage Rates in Massachusetts
While national interest rates significantly impact mortgage rates and refinancing rates, local economic factors such as state laws and competition among lenders also have an effect. For example, the cost of doing business drives up the cost of a mortgage, and in 2015, Massachusetts was listed among the top ten states with the highest cost of doing business.
There are also myriad other factors that go into determining a borrower’s mortgage and refinancing rates. We will explore these components further in-depth while offering concrete advice on how to secure the best mortgage rates in Massachusetts.
Critical Elements That Affect Mortgage Rate & Refinancing Rates in Massachusetts
There are multiple variables at play when it comes to determining mortgage and refinancing rates in Massachusetts. Developing a solid understanding of these factors can help you save when financing a new home.
One of the primary determinants of whether or not you qualify for a home mortgage loan and what rates you are eligible to receive is your credit score. Lenders view potential borrowers with high credit scores to be lower risk and therefore responsible enough to qualify for lower mortgage rates while considering those with lower scores to be less reliable and possibly ineligible for a loan.
Generally speaking, a FICO score above 661 is deemed to be good, while a rating over 720 is seen as excellent. While it is possible to get a mortgage with bad credit, many conventional loans require a minimum credit score of 620.
With some rare exceptions, lenders typically require a down payment, which can sometimes be as low as 3 percent of the total home value. While low or no money down options may appeal to buyers with small savings accounts, a more substantial down payment means a lower interest rate and a smaller principal to pay off.
The traditional rule of thumb contends that putting down 20 percent or more is the best way to lower your rates significantly.
Another relevant factor in determining mortgage rates is the loan term, or how many years the loan is meant to last. Shorter term loans typically require higher monthly payments, but also usually guarantee lower interest rates and overall costs, making them ideal for borrowers who want to pay off their home in a hurry.
Homebuyers looking to settle down and pay less per month may opt for a longer loan term.
Type of refinance
As mortgage rates go down, those who currently hold loans with higher rates may want to refinance to start paying less. According to Zillow, the most popular refinancing choice is the rate-and-term refinance, in which the original loan is paid off and replaced with a new loan and corresponding new rate and set of terms.
Those in need of cash prefer a cash-out refinance, which involves pulling out equity from your home, while those who have cash on hand may choose to lower their loan amount and monthly payment with a cash-in refinance.
Borrowers should explore all of their choices if considering refinancing, while also comparing various lenders to see which offer the most attractive terms.
How to Get the Best Mortgage & Refinancing Rates in Massachusetts
If you want to score the best mortgage rates and refinancing options in Massachusetts, it’s imperative that you shop around before deciding on a lender. Failing to properly research the market and compare and contrast the offers available can cost borrowers tens of thousands of dollars over the term of the mortgage. To make sure you don’t end up overpaying, follow these essential steps:
Research different mortgage and refinance types
There are many kinds of mortgages and refinance options, and it’s likely you are eligible for more than one. Read up on the advantages and disadvantages of each, paying close attention to how your rate would be affected by each selection.
Keep in mind, though, that the most prudent choice is not always the cheapest. Different types of borrowers have different needs and abilities, and it’s essential to find the loan type that conforms to your unique situation.
Reach out to multiple lenders
Nearly 80 percent of homebuyers surveyed by the Consumer Financial Protection Bureau said that they only applied to one lender when purchasing their home. Just as you would always compare deals on flights and hotel rooms before booking a vacation, it’s essential that you buck the national trend and get quotes from multiple lenders before committing to just one.
Take advantage of any lender that offers free online quotes, and get on the phone with a few loan officers from more traditional institutions. In addition to getting a better feel for your options, you may also be able to negotiate a better deal by mentioning other quotes you’ve received, as lenders sometimes offer to pay closing costs or eliminate certain fees if you accept their business.
Remember to calculate additional costs
Part of being a savvy shopper is going beyond the advertised rate and uncovering any hidden fees that should be factored into the overall cost. Before committing to any loan, be sure to ask the lender about any potential broker fees, prepayment penalties, closing costs or underwriting costs.
You should also be provided with a Good Faith Estimate after you have submitted your loan application, which is meant to give a rough picture of what you can expect to pay.
Recommended Companies in Massachusetts
Comparing and contrasting available mortgage rates in Massachusetts can be overwhelming, as the Bay State has quite a few lenders to choose from. Yet shopping around for the best rates is an essential part of the process when it comes to acquiring a home loan. Start your search by looking into some of the top mortgage lenders in Massachusetts:
Ranked #1 for Customer Satisfaction on LendingTree and given an A+ rating by the Better Business Bureau, J.G. Wentworth is one of the most reputable lenders in the state. Low mortgage rates and the promise of no points or hidden fees explains the company’s popularity, but the minimum credit score requirement of 620 means it’s not a viable option for everyone.
This relatively recent entrant to the lending market has proven revolutionary with its streamlined, online-only application process which can pre-approve a loan and lock your rate in as little as eight minutes.
New American Funding
Among our highest-ranked non-bank lenders is New American Funding, which has more leeway in approving loans due to its manual underwriting process.
Boasting a comprehensive set of loan options, multiple down payment assistance programs and a minimum credit score requirement of just 580, New American Funding distinguishes itself as one of the most flexible lenders in Massachusetts.