Hi, I'm Jason.

Welcome to my blog. This is where I document my musings about Boston-area real estate, restoring an old house, being a new dad, and other random thoughts. Thanks for stopping by!

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Real Estate 101: Choosing a Lender and Taking a First Time Homebuyer Class

Most of the time when I work with a real estate client, it is with someone who is a first time homebuyer. This isn't surprising, since there aren't a whole lot of people who do multiple real estate transactions in their lifetimes. The vast majority of people only do this once or twice. This series of posts is for those of you who are entering the home buying process for the first time, or for anyone who wants a refresher.

So you want to buy a home. Great! You are probably excited to be browsing the online listings and might even be dropping in to open houses. But before you do anything serious, you should find out from a lender what you can afford.

Choosing a Lender

This is complicated, because almost every agent has a trusted lender that they work closely with. We want you to get a great deal on your financing, but we have all dealt with transactions that have had major issues (or even fallen through) because the lender wasn't holding up their end of the deal. And unless you're one of the few who can pay cash for a home in Boston, you need financing. So sending you to a lender before you've signed on with an agent can be counterintuitive. Ideally, you'll decide on an agent and then quickly turn around and talk to a lender based on the agent's recommendation. But if you want to start looking casually and arent' ready to commit to an agent, you still need a firm idea of what you can actually afford. 

You don't have to get a full pre-approval before you move on, but you should get a good sense from a lender what you can afford, how much down you will need, how much you will need to bring for closing costs, how much they will require in reserves, etc. Without that info, your agent won't be able to help you. If you do get a pre-approval, it is usually good for 60 days, so you will want to start your search in earnest once you have the letter in hand.

I vastly prefer that my clients work with a small local bank vs a big national lender. I also prefer that they go with a bank vs a mortgage broker. You can get a very competitive mortgage from the little guys, and the service is almost always better. Having a competent local lender who understands how we do things in Massachusetts and is responsive to your needs can make or break a successful transaction. But you are of course free to choose whoever you want for your mortgage.

I recommend David Collins at the Institution for Savings in Newburyport to all my clients. The bank lends in Boston even though it doesn't have branches this far south. I've found that Dave is remarkably competent, the bank offers can't-be-beat rates, they are willing to work with their clients on things like rehab loans, and they can close very quickly. They also hold their loans in-house instead of bundling them up and selling them off, which is how they avoided the subprime crisis. If they lend you money, you will deal with them for the life of the loan. They hold the notes on both of my properties, which is the highest endorsement I can give.

I have also had several clients go with Leader Bank and they have all been happy. I don't have a contact there, though .

Massachusetts has a number of programs to help first time homebuyers, including down payment assistance and special loan programs. The City of Boston also has its own programs. Unfortunately, our rapidly rising prices in metro Boston have exceeded the maximum qualifying purchase price for many of these programs, but it is still worth investigating them if you think you might qualify. Most local banks are familiar with these programs and can tell you if they work with them. The best place to start is at My Mass Mortgage.

First Time Homebuyer Classes

Many local lenders, including both Institution for Savings and Leader Bank, work with 3rd party groups to provide First Time Homebuyer classes. You can also find these courses offered by municipalities and nonprofits in almost every city and town in Massachusetts. These classes are very useful sources of info on the entire homebuying process as a whole and the lending process in particular.

I lump first time homebuyer courses in with the lender info because some lenders will reimburse you for the cost of the class if you close a mortgage with them, so it's worth inquiring about that when you are talking to a lender. One of the big reasons to take a course is for a certificate that you will get that enables you to access certain low-down payment mortgages and other programs that are designed for first time homebuyers.

Unfortunately, these programs usually have a maximum purchase price that is no longer viable in Boston and the close-in suburbs, so the classes aren't as valuable as they once were. The exception is for low-income homebuyers who are entering the lottery for subsidized units, in which case the course is mandatory. But it's still a good idea to take one of these courses for your own information, even if you aren't able to take advantage of the subsidies.

Many organizations offer courses, but the City of Boston is a particularly good resource. Here's a link to all of their courses. They also have a list of approved partner agencies that offer courses. MassHousing, which offers first-time homebuyer assistance among many other programs, has a  complete statewide list of course providers. 

Shout-Out: Boston Building Resources

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