MHP’s ONE+ mortgage offers heavily discounted interest rates to buyers in 29 working-class Massachusetts cities. iStock illustration

The Massachusetts Housing Partnership launched a new mortgage product last week that aims to make the home-buying process more affordable for low- to moderate-income first-time homebuyers.

Amid current market conditions, experts say that goal will be challenging to fully realize.

The ONE+ Mortgage product provides income-eligible buyers with heavily discounted, fixed, 30-year mortgage rates, along with up to $50,000 in down payment and closing cost assistance. The program also doesn’t require private mortgage insurance, similar to MHP’s existing ONE and ONE+Boston products.

“It’s just going to mean the difference for that household that doesn’t want to stretch to the point of nearly breaking just to buy their first house,” MHP Director of Homeownership Elliot Schmiedl said of the program. “By helping folks with a lower monthly payment, down payment assistance, closing cost assistance, hopefully we’re helping them not just get into the home, but in a way that is sustainable for the future.”

‘Critical for Buyers’

Some of the biggest names in Massachusetts see a lot to celebrate in the new product.

Gov. Maura Healey, Lt. Gov. Kim Driscoll, Boston Foundation President and CEO Lee Pelton, state Housing Secretary Ed Augustus and Bob Rivers, Eastern Bank’s executive chair and chair of the board of directors, were all on hand last week to lend their support – and dollars – to MHP’s new product.

In his speech at the launch event in Lynn, Rivers highlighted how the program helps make deals to buy homes easier to digest for low to medium-income households.

“Programs like these are critical for buyers in helping their ability to make the deal work,” he said. “They don’t do much to change the price, but they help make digesting the price and having home ownership a lot easier than it otherwise would be.”

Graphic by Bill Samatis | Special to Banker & Tradesman

ONE+ is available to first-time homebuyers in the 26 Massachusetts Gateway Cities, plus Framingham, Randolph and Boston. Prospective buyers must also complete a homebuyer education class and, if purchasing a two- or three-unit multifamily property as their primary home, participate in a pre-purchase landlord course.

Officials at Monday’s launch said such a program could not be created by a single entity. MHP’s program was created with $11 million funding from the state of Massachusetts, Eastern Bank, the Eastern Bank Foundation, the State Street Foundation and the Boston Foundation.

“Addressing this high cost of housing is not a challenge that any one entity, any one level of government, can take on by itself,” Driscoll said. “What we learned is that it takes a whole lot of hard work and focus, but most importantly, partnership.  Everyone understanding what it’s going to take and understanding the future – the future for our communities, the future for our commonwealth – depends on us coming together to solve this challenge.”

Officials Hope to Boost Buying Power

MHP says its new program will help low- to moderate-income households achieve the dream of homeownership. In addition to building wealth, they’ll get protection from the region’s rent increases.

According to data from The Warren Group, publisher of Banker & Tradesman, the median single-family sale price increased 1.6 percent on a year-to-year basis last month, to $615,000. That’s a record high for the month of October.

“Because of the house price appreciation, it’s really hard for those low-income home buyers,” said Jun Zhu, a non-resident fellow, housing finance at the Urban Institute. “Especially the first-time homebuyers without family wealth will have some difficulties in terms of putting down the down payment.”

In 2022, 36.7 percent of all denied mortgage applications in the United States were due to high debt-to-income ratios according to Zhu. The situation is even more pronounced for low- and middle-income borrowers, where 46 percent of denials were due to high DTI ratios.

Through the ONE+ program, officials said, buyers should see their purchasing power increase due to the interest rate reductions and down payment assistance.

Gov. Maura Healey addresses an audience at the Lynn Housing Authority headquarters celebrating the launch of the Massachusetts Housing Partnership’s ONE+ Mortgage program on Nov. 25, 2024. Photo courtesy of Eastern Bank

Modeled on ‘Life-Changing’ ONE Mortgage

David Jiles, a homeowner in Lynn who purchased a condominium unit through MHP’s existing ONE Mortgage Program, knows just how impactful these programs can be. He arrived in Boston for graduate school over a decade ago with $76 in his bank account and no savings.

At that point he was focused on simply surviving, he said.

When he began his initial homebuying process, Jiles said, he knew home prices were high. But the sticker shock still had him feeling that owning a home of his own was an impossible dream.

Then came the open houses, where he met some of the prospective homebuyers he was competing against.

“You’re competing with people who have access to funds or who have wealth that I just didn’t even have,” he said. “It was sort of an affirmation, affirming of, ‘You won’t be able to afford any house, you won’t even be able to afford a condo here.’”

Jiles said he was forced to ponder if he had to leave Massachusetts to find more affordable housing.

But through the help of those in his Massachusetts Affordable Homeownership Alliance’s homebuying class and others helping him find a home he was introduced to MHP’s ONE program. Like the ONE+ loan, it features a low down payment requirement and a discounted 30-year interest rate.

“I had funds to contribute to a down payment before that,” he said. “I had a meager savings, but nothing that could compete with $80,000, $100,000, that some people are paying and have in their bank account.”

Jiles described the ONE Mortgage program as “life-changing.”

A promotional graphic from the Massachusetts Housing Partnership comparing a conventional home loan with MHP’s ONE and ONE+ loans. Image courtesy of MHP

Supply Struggles Pose Bigger Challenge

But one discounted program cannot fix the entire housing process. Lots of dominos will still need to fall in order to make housing more affordable.

A lack of supply is driving up competition for each home that does come to market – and therefore prices. Even though Pelton, of The Boston Foundation, believes that the ONE+ program will be effective at helping some buyers, he said supply still plays a major role in the Massachusetts housing market.

“We believe the program will be effective, but we also understand that we need to increase the supply, which is what the governor spoke about,” he said. “If we increase the supply, we lessen demand, and we are able to bring down, or at least hold the prices on homes.”

Rivers also stressed the need for increased supply.

“We’ve got to build more housing, full-on,” he said. “There’s a lot of initiatives that the administration has taken on to drive that. Whether it be MBTA Communities or other things within the housing bill to make projects work. That’s going to be critical.”

At last week’s event celebrating the launch of the mortgage product, Healey touted her administration’s efforts to make up for years of underbuilding in Massachusetts with recent bonding bills.

“We hadn’t been building houses here in the state,” Healey said. “We sought to change that.”

Sam Minton

As the calendar inches closer to 2025, affordability will continue to be an issue. Zillow’s “ZHVI” home-value index shows that even for homes in the bottom fifth of the Greater Boston market, prices continue to increase. The latest data shows between the 5th to 35th percentile by price, the typical condo or single-family house is now worth $491,194. That represents a 12.6 percent increase year-over-year and far above than the national average of $191,875.

Down payment assistance programs could be one way forward. MHP’s Schmiedl said more banks are creating down payment assistance programs of their own as their traditional mortgage customer base, middle-class homebuyers, get squeezed ever more tightly by home prices.

“Competition is good,” Schmiedl said. “If our banks are putting their best foot forward, offering our product, but also alongside it, maybe they’re offering their own affordable product, perhaps with no [private mortgage insurance], or even their own down payment assistance. We think that’s all good, because the same way that we want to promote choice of housing options, we want to promote choice of mortgage options and financing options. The broader the menu is for first-time homebuyers, we think that’s better in the long run.”