First-time Massachusetts homebuyers may face added challenges

For many Massachusetts workers, buying a house is the quintessential American dream. Such a goal often involves years of saving and planning. For example, in order to qualify for the most favorable mortgage rates, a homebuyer may need to make a sizable down payment, perhaps as much as 20 percent.

Yet in a housing market that is still recovering, a recent announcement from Bank of America is not good news. The bank used to offer a first-time homebuyer program. In a change to its lending strategy, however, Bank of America will now direct borrowers to other sources, such as programs offered by the Federal Housing Administration.

According to a report produced by the Massachusetts Affordable Housing Alliance, the move may negatively impact lower income first-time homebuyers. Unlike Bank of America’s program, other entities or programs may charge higher fees, impose higher interest rates and include other requirements. For example, the FHA’s program, called One Mortgage, requires borrowers who make a smaller down payment to purchase private mortgage insurance.

Bank of America is Massachusetts’ largest bank, with almost $58 billion in deposits from local customers. However, a bank representative said that a national effort to simply the company’s lending strategy makes it unwieldy to offer affordable lending programs on a state-by-state basis.

Given these local changes to available mortgage financing options, a prospective homebuyer may want to consult with a real estate attorney for help understanding various lending terms. An attorney can evaluate your financial situation and help individuals obtain the most beneficial terms possible.

Source: Boston Globe, “Bank of America retreats from affordable loan program,” Deirdre Fernandes, June 4, 2014