Which Mortgage Fits: Conventional, FHA, VA and MassHousing

Most Massachusetts buyers choose between four families of mortgage. They differ in down payment, in how mortgage insurance works, and — the part people underestimate — in how a seller reads the offer.

Conventional loans

Not government-insured, and the default for most buyers with reasonable credit. Down payments start at 3% for qualifying first-time buyers, 5% is common, and 20% removes mortgage insurance entirely.

Below 20% down you pay private mortgage insurance. The key difference from FHA: conventional PMI ends. Once you reach 20% equity you can request cancellation, and the servicer must terminate it automatically at 22% equity based on the original amortisation schedule. On a long hold that is a significant saving.

Conventional loans are also the least friction in a competitive offer, because there are no property-condition requirements beyond the appraisal.

FHA loans

Insured by the Federal Housing Administration. 3.5% down with a credit score of 580 or above, and more flexibility on credit history and debt-to-income than conventional underwriting allows.

The trade-off is the insurance. FHA charges an upfront premium plus an annual one, and on most current FHA loans the annual premium lasts the life of the loan unless you refinance out of it. On a 30-year hold that changes the total cost materially.

FHA also imposes minimum property standards. Peeling paint on a pre-1978 house, a roof near end of life, or an unsafe handrail can require repair before closing — which the seller has to permit. In a multiple-offer situation, that is why an FHA offer is sometimes read as weaker even at the same price.

VA loans

For eligible veterans, active-duty service members, and some surviving spouses. Zero down payment, and no monthly mortgage insurance at all — a one-time funding fee instead, which is waived for veterans with a service-connected disability.

VA loans are the strongest terms available to anyone who qualifies, and eligible buyers routinely fail to use them because they assume the process is slow. It is not, particularly with a lender that closes them regularly. Like FHA, VA has property condition requirements.

MassHousing and state programmes

MassHousing is the Commonwealth's affordable-housing bank, and its loans are made through participating lenders rather than directly. The programmes carry income and purchase-price limits that vary by community, and some include down-payment assistance and a mortgage-insurance structure priced better than standard PMI for borrowers who qualify.

There is also the ONE Mortgage programme, offered through the Massachusetts Housing Partnership, which pairs a low down payment with no private mortgage insurance for eligible buyers.

Both are worth checking before you assume you need 20%. Limits change, so confirm current figures directly with MassHousing and the Massachusetts Housing Partnership rather than relying on a summary.

Fixed or adjustable?

A 30-year fixed rate is the default for a reason: the payment is knowable for the whole term, and you can refinance if rates fall. A 15-year fixed carries a lower rate and builds equity much faster, at a substantially higher monthly payment.

An adjustable-rate mortgage starts lower and adjusts after an initial fixed period — commonly five, seven or ten years. It is defensible when you have a genuine reason to expect a shorter hold, and a gamble otherwise. If you take one, read the caps: the maximum first adjustment, the maximum per subsequent adjustment, and the lifetime maximum. Those three numbers define your worst case, and you should be able to afford it.

What about jumbo loans?

Loans above the conforming limit are jumbo, and the conforming limit is set annually and varies by county — several Greater Boston counties carry a higher limit than the national baseline. Jumbo underwriting is stricter: larger down payments, higher reserve requirements, tighter credit standards. Confirm the current limit for the specific county rather than assuming, because a purchase price just over the line changes the whole loan profile.

How do I actually choose?

Work backwards from three questions:

1.How long will you hold it? A short hold favours the lowest current payment. A long hold favours getting out of mortgage insurance, which is the conventional argument over FHA.
2.How much cash do you have, after closing costs and reserves? Not how much you have — how much is left afterwards. An empty account after closing is how a manageable mortgage becomes an unmanageable one.
3.How competitive is your market segment? Where offers are stacking up, the loan type is part of how a seller reads yours.

Then get a written pre-approval, not a pre-qualification. A pre-approval means an underwriter has reviewed your documents. A pre-qualification means someone did arithmetic with numbers you told them, and listing agents know the difference.

Compare Loan Estimates from at least three lenders on the same day — rates move — and compare the whole form, not just the rate. Points, origination fees and lender credits move real money.