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The Town of Adams, Massachusetts, through its Community Development Office, would like to tell you about its FIRST TIME HOME BUYER’S PROGRAM. This program is funded with moneys made available from the MASSACHUSETTS HOUSING FINANCE AGENCY (MHFA) in conjunction with the Town’s participating mortgage lender – the FIRST NATIONAL BANK OF THE BERKSHIRES. MHFA makes these moneys available through their Neighborhood Rehabilitation Set-Aside Program to the various participating lenders across the State. This program is basically a purchase and rehab program that provides mortgage money with financing terms that you will be very hard pressed to beat! The outlined discussion below tells you all the information you need to know about the program. Please take some time to review this booklet, and make yourself a list of questions that you have about the program. Then call the Community Development Office and make yourself a personal appointment to have all your questions answered. The Community Development Office is located in Town Hall – Third Floor, and is open Monday through Friday from 8:30AM – 4:00PM. Our telephone number is 413-743-8317.


As stated previously, the FIRST TIME HOME BUYER’S PROGRAM is a home mortgage loan program that offers financing for the purchase and rehabilitation of residential homes. Please call our office for current financing terms. Financing terms are subject to change weekly as MHFA provides different financing terms throughout any given year.

These funds must be used for the purchase and rehab of residential homes within the Town boundary limits. Persons wanting to purchase outside Adams must go to another local Rehab Agency and/or any other MHFA approved lender. A LOCAL REHAB AGENCY is a place like the Town’s Community Development Office, an agency that markets the program. Please see MHFA’s brochure for a listing of other Local Rehab Agencies in the area. Loans can only be made on 1 to 4 family existing homes. “Existing” means that the structure must have been first occupied as a residence at least five years previous to now. Newly constructed homes are not eligible.

A family’s income must also not exceed the MHFA Income Ceiling Limits in order to qualify. Families who gross more income than the following income ceiling limits are not eligible to apply:

1 or 2 persons $58,600
3 or more persons $67,300

Income is defined as the GROSS ANNUAL HOUSEHOLD INCOME. This amount is the aggregate annualized gross income of the borrower and all other people living in or expecting to live in the residence which the borrowers will be occupying at the time of loan closing. Annualized gross income is gross monthly income multiplied by 12. Gross monthly income is the sum of monthly gross pay; any additional income from all sources, plus both taxable and nontaxable income including but not limited to any of the following: earnings, overtime, part-time employment, bonuses, dividends, interest, annuities, pensions, Veterans Administration compensation, gross rental or lease income, commissions, deferred income, welfare payments, social security benefits, disability payments, alimony, support payments, public assistance, sick pay, unemployment compensation and income received from trusts from business activities and investments.

If a family’s income is within the above stated income limits, this does not automatically mean that they qualify for a loan. Families still must also have a very good credit history, must be able to afford a loan, and the home must be a reasonable investment for the bank to secure the loan against.

The Total Acquisition Cost must also be within MHFA’s limits for this region. The TOTAL ACQUISITION COST is defined as the purchase price of the home, plus the total cost of rehabilitation, plus the total cost of the LOCAL REHAB AGENCY FEE. This fee is 3/4 of 1% of the loan amount plus the cost of the improvements. MHFA requires that buyers borrow additional money on top of the purchase price in order to reinvest it back into the home for improvements. MHFA requires that families borrow the minimum following amounts for rehab of a) $3,000 for a single family home, b) $4,000 for a two family home, c) $5,000 for a three family, and d) $6,000 for a four family home (or 10% of the loan amount, whichever is less). Actual costs of rehab and eligible scopes of work will be discussed further along in this booklet. The Total Acquisition Costs for this region cannot exceed the following:

Single family existing $ 127,000
Two family existing $ 143,000
Three family existing $ 174,000
Four family existing $ 202,000

Even though the cost of homes in the Town have risen dramatically over the last few years, it is very unlikely that families will even come near these acquisition limits. Please remember that these limits change periodically and newly constructed homes are not eligible.

If you purchase a 2-4 family home the borrower will need to go through the Homebuyer Counseling Program. Counseling programs involve a minimum of four sessions. Topics discussed during training include: Definition of Terms of the Mortgage Process, Overview of the Mortgage Application Process, Review of Downpayment and Closing Cost Requirements, Credit Evaluation, The Appraisal Process, Employment History, The Self-Employed Borrower, Finding an Affordable Property, Working With a Real Estate Broker, Making an Offer to Purchase, How to Get a Home Inspection, Tax Planning, Keeping Your Credit Clean, Maintaining Your Home, Loan Delinquency Rights and Responsibilities, Condominium Responsibilities, 2-4 Unit Ownership Responsibilities, Overview of MHFA Programs, Other Affordable Financing Options, MHFA vs. Conventional Financing Guidelines.

Priority is given for first time home buyers and this means pretty much what it says.

Proof of being a first time home buyer means that you must submit your families last 3 years Federal IRS Income Tax Returns (this is a must – so please start “digging” them out) when you go to the bank. Families that presently own a primary residence may still be eligible to apply so long as they sell all their present real estate interests on or before the closing of their next home. They also need to use some of the proceeds from that sale to buy the home you are financing with the MHFA Mortgage Loan, yet priority is still given to those families that have never owned before.

Please remember that this program is not a program that you sign up for and have your name put on a waiting list. This is not a program that has a list of homes, buyers, sellers and real estate agencies. If you think of this program as “the bank” in the overall real estate transaction you should not have a problem. You must apply to the program and this means having an executed Purchase & Sale Agreement on a home that you have already found. Due to the very limited amounts of funds available, the program is basically “first come – first serve”, so please follow the remaining steps in the booklet to find out more details on the program.


The very first step for you in this program without a doubt is the hardest one — finding the house! Finding a home with the location you want, one that suits your family’s needs, yard space, and one that offers an affordable monthly payment are all qualities in a home that are hard to balance at the same time. Just because this program offers outstanding financing terms this should not mean that you go out and buy the first home that comes along! You should still be a discriminating buyer and take the quality time and effort that is necessary when searching. Searching for your home is basically all up to you. Again, this program does not have a list of buyers, sellers and real estate agencies, so the task of finding a home ultimately depends upon your own aggressiveness. The program does offer though a great house guide booklet which is put out by MHFA (the “puzzle booklet”). This buyer’s guide offers many tips when searching for a home so please take advantage of it. Once you find the home you will need to get an executed (signed) Purchase & Sale Agreement on it.

A PURCHASE & SALE AGREEMENT (“P & S”) is a legal and binding contract between the Sellers and Buyers that should spell out all of the details (price, time for closing, contingencies for financing or home inspection, etc.) on the sale of the home. Most parties in a real estate transaction are usually represented by a licensed Real Estate Broker, so the Seller’s and/or Buyer’s broker is the one that will handle the P & S for you. If the assistance of a broker is not available, most lawyers will draw up a P & S for you, but this program offers a free service of completing P & S’s for you.

Once you have your signed P & S simply submit this to the program as you would to any other bank for financing. Your P & S should at a minimum indicate that the sale is contingent upon your ability to secure financing through this program. Buyers should allow themselves one month to secure a mortgage commitment and an additional month to close. Due to the extremely limited amount of funds available, Buyers are encouraged to call the program first and are encouraged to have backup financing available from other local banks should moneys not be available in this program. An executed P & S allows you to now officially sign up with the program, and you are now ready to go on to the next step.

C. INSPECTION & WORK WRITE-UP The receipt of an executed P & S Agreement is the program’s “greenlight” to go to the home to make an inspection. As stated previously in this booklet, MHFA requires that extra money be borrowed to put back into the home for repairs.

The extra funds borrowed are lent at the same terms as the loan and this is the best aspect of this program! The buyers are really getting a home improvement loan while getting a home mortgage. The minimum amounts mandated by MHFA are:

$ 3,000 – on a single family
$ 4,000 – on a two family
$ 5,000 – on a three family
$ 6,000 – on a four family (or 10% of the loan amount, whichever is less)

These amounts are only the required minimums. A family can borrow as much as they want extra for rehab as long as they can afford it, as long as the scopes of rehab work are eligible, and as long as the availability of funds exist. The inspection performed by the program will tell the Buyers the “must do” items for rehab. These are existing building/sanitary code violations in the structure, if any. Lead paint inspections may have to be done as a “must do” item if any units in the structure have children under the age of 6 residing there. Buyers also have to tell the program the “want to” items for rehab. All types of work are eligible for rehab (painting, new windows, doors, plumbing, heating, roofing, wallpaper, etc.). The only real scopes of work not eligible are landscaping, new additions, and garages. The program then takes the list of “must do’s” and “want to’s” and incorporates them into a Work Write-Up. The Buyers then receive this Work Write-Up and are now obligated to find the actual cost of rehab.

Note, the inspection by the program is mandatory! Therefore the Sellers cooperation must be given and the program must be able to get into all parts of the structure in a timely fashion so that the Buyers mortgage application does not get delayed. Sellers are also required to sign a SELLERS AFFIDAVIT as part of the inspection process. If Buyers have reserved themselves a period of time in their P & S Agreement for what is traditionally known as the HOME INSPECTION, the Buyers are not allowed to use the program’s inspection for this. It will be up to the buyers to find an outside party to conduct this inspection for them if desired. Please ask your broker or the program for clarification on this matter if needed.


The bank cannot and will not give a mortgage commitment to the Buyers until they know the actual cost of rehab. The actual cost of rehab depends upon a) the number and severity of the “must do” items (the existing building and sanitary code violations, if any), b) the number and scope of the “want to” items, and c) the amount charged by the contractor that the Buyers hire to do all the work in the buyer’s Work Write-Up. When the Buyers pick up their Work Write-Up the program will give them a list of contractors in the various fields of work that will be done in the home so that they can obtain a price for all of the work. The Buyers do not have to hire contractors from this list. The list of contractors is another free service of the program. The Buyers can ultimately hire who they want so long as the contractor hired can obtain all the necessary work permits and this means that they have to be licensed in this state for the particular type of work that they do (i.e; licensed electricians, carpenters, plumbers, etc.).

It is very important to tell the hired contractor that they will probably not start the work until two months later after the Buyers close on the home. A two month delay will probably affect the cost, and the contractors need to know this for scheduling purposes. Please also get a “firm price” for all of the work because there will be only one loan closing, and if the contractor you hire decides to increase the price two months later because you failed to tell him that work would be starting at that time then you will have to investigate other avenues.

In order to protect Buyers from price changes and starting times it is highly recommended that the Buyers sign a written contract (a CONSTRUCTION AGREEMENT) with their contractor.

The program’s Work Write-Ups are made to act as a CONSTRUCTION AGREEMENT and Buyers may use this if they want to although they are not required to do so. Most contractors also have their own proposal agreements that the Buyers may use or they may want to have their attorney make up one for them.

The length of time it takes for the Buyers to obtain the cost for the work involved really depends upon the Buyers themselves. This could take one or two days or could take up to a couple of weeks. It all depends upon how aggressive the Buyers are at obtaining their prices. Once a total cost is determined you are now ready for the next step (note – more will be discussed further along about the actual rehab work, when it is to be started and finished).


Buyers are required to bring their costs of rehab to the program. The program will then take this information along with other information (i.e; buyer’s income, other debt, property taxes, insurance, down payment, etc.) and fill out for the Buyers an MHFA Loan Processing Worksheet. This worksheet tells the Buyers what their monthly payments will approximately be and whether or not they can support the investment to be made into the home. This serves to act somewhat as a pre-qualification for the loan although it is not a definitive answer for the loan. The bank still has to conduct the appraisal and check the credit histories of the Buyers. This worksheet will also inform the Buyers the amount they must now pay for the LOCAL REHAB AGENCY FEE. This fee gets “rolled” into the total loan amount.

Once this is complete, the program will set up an appointment for you at one of MHFA’s participating mortgage lenders in this area. One of the participating lenders for this area is the First National Bank of the Berkshires located in North Adams and Lee (or the program can direct you to any other MHFA participating lender within the same region). For your appointment the Buyers will be expected to bring with them the following materials:

1. Purchase & Sale Agreement
2. Construction Agreement (with total cost of rehab)
3. Mortgage Application Package (the mortgage application will be issued to the buyers when they initially deliver to the program the P & S Agreement back in step B.)
4. Loan Processing Worksheet
5. Mortgage Application Fee (this fee is approximately $250 for a single family home or $325 on a multifamily home and this is usually a NON-REFUNDABLE fee)
6. Last 3 years Federal IRS Income Tax Returns (form 1040 with all applicable schedules

As previously stated the bank appointment will be made for you when the Loan Processing Worksheet has been completed. Both Buyers should attend this appointment so please make the necessary arrangements. The Loan Officer at the participating bank will review all submitted materials as discussed above and make sure that the mortgage application itself is complete. The bank will then send out all Buyer employment and income verification forms, conduct the credit history check and schedule the appraisal. Within a couple of weeks the bank should be ready to either issue a denial or a mortgage commitment. If a mortgage commitment is issued, then the Buyers notify their attorney to conduct the title search and to contact the seller’s attorney so that they can close the transaction. All parties will be appropriately notified for the time of closing and once again necessary arrangements should be made so that all persons involved can attend the closing. The closing usually takes place a few weeks after the mortgage commitment has been issued and will take place right at the participating bank.


On the day of closing the Sellers receive their money and the Buyers receive the keys to the home. The extra funds borrowed for rehab though will stay in a escrow account right at the bank. The Buyers have 90 days from closing to get all of the work done. This is something the hired contractor(s) should be made aware of right from the start. The contractor(s) will start the work and will request payment. The new homeowners will then approve the work and request the program (the Town’s Community Development Office) to confirm this. All payments must go through the program. The program has standard escrow payment forms that will require signatures from the contractor(s) and homeowners. The program mails these to the participating bank and within one week the bank will mail back to the program the check(s). All checks will be made payable to the contractor directly and will have to be picked up at the program office. All work must conform to the appropriate code requirements and must be done within the time period allotted. Requests for work extensions will only be given for justifiable reasons. All work to be performed by the Buyers themselves and checks made payable to suppliers will be handled on a case-by-case basis; please ask for additional details.

Once all the work is complete the program will issue a completion report to the bank. When the last payments are made to all the participating contractors, they will be required to sign an MHFA release of liens and warranty of work form. The bank will also issue at completion a check made payable to the homeowners for the amount of interest income earned on the rehab escrow account. This completes the entire process.

Please also bear in mind that MHFA also lends out these funds for straight purchases at selected times. The program described here is a PURCHASE AND REHAB one, which is very different from a straight purchase! Ask the program for more details about this.

Before we leave you please find the following example on a typical single family home transaction that shows you acquisition cost, down payment, closing costs, and other important information that just may happen to you when you find your first home. Good Luck!!



Sales Price $ 60,000
Total Cost of Rehab (equal to construction agreement) +$ 3,686
Equals Subtotal $ 63,686
Minimum Down Payment towards Purchase & Rehab (@ 5%) x 5% x 5%


Amount of Purchase & Rehab to be Financed ($63,686 – $3,184)

$ 60,502

LOCAL REHAB AGENCY FEE OR LRA (.0075% of $60,502) $ 454

TOTAL ACQUISITION COST (TAC = Purchase Price + Rehab + LRA)

$ 64,140

Total Minimum Down Payment Required (5% of TAC) $ 3,207
MORTGAGE LOAN AMOUNT (TAC – Total Min. Down Payment) $ 60,933

Monthly payments on this loan amount can be broken down into what is known as “PITII”:

6.99% 7.15% 7.30%
“PI” is for principal & interest, & a $60,933 loan for 30 years at 6.99%+2 pts., 7.15%+1 pt., 7.30% w/ no points yields a monthly payment of …… $ 404.98 411.55 417.74
“T” is for the monthly property tax portion (assume $804 annual property taxes) 67.00 67.00 67.00
“I” is for property insurance (assume $250 annually) 20.83 20.83 20.83
“I” is for Primary Mortgage Insurance (see note below on “PMI”) 20.31 20.31 20.31
Total Monthly Payment $ 513.12 519.69 525.88

CLOSING COSTS (note – this is an estimate)

Mortgage Application Fee $ 250.00 (non-refundable)
Origination Fee (2% of loan amount) $1,219.00
Credit Report Fee $ 30.00
Municipal Lien Certificate $ 25.00
Plot Plan $ 150.00
Recording Costs $ 60.00
Title Insurance ($1.25 per $1,000 worth of loan amount) $ 76.00
Attorney’s Fee (buyers hire the lawyer of their own choice) $ 400.00
Primary Mortgage Insurance (1st year’s worth must be prepaid and is approximately 1% of the mortgage loan amount) $ 609.00

Estimated Total Closing Costs $2,819.00

Therefore, the total closing costs along with the minimum required down payment of 5% (2.5% must be borrowers own funds – Remainder can be gifted) in this example means that the Buyers would have to have $6,026 in CASH to complete the sale of this single family home. Buyers should expect to have approximately 10% of the sale price of the home in cash if they are going to pay for all of the associated costs themselves. If Buyers do not have enough money, MHFA will allow a blood relative to offer GIFT MONEY (ask the program or the bank to explain more about gift letters) to write down the closing costs and to help pay for half of the minimum 5% down payment requirement.


(NOTE: If your down payment on the house is under twenty-five percent of the appraised value or the acquisition cost, whichever amount is lower, of the property, your loan must be insured with mortgage insurance. Your mortgage lender will submit your loan application to the insurer for approval. If the insurer approves your loan, you are responsible for paying the insurance which includes upfronting the first year’s total payment at the time of closing, and your regular monthly payments to the bank will begin prepaying your second and subsequent years. Because MHFA has recently established their own mortgage co-insurance program with a new mortgage insurance company, closing costs relative to mortgage insurance will decrease this year. This new feature has also served to eliminate the reserve requirement of having 2 to 3 months of carrying costs (PITII) on hand after closing. Based on the size of your down payment, the annual mortgage insurance premium will vary and change from year to year. Also, the 6.99%, 7.15% and 7.30% interest rates are the CONTRACT INTEREST RATES. The ANNUAL PERCENTAGE RATES, APR, will be about 7.22%, 7.39% and 7.55% and may ultimately be slightly higher or lower if the premium charged by an insurer is different than stated above or if a higher down payment is put down by the Buyers in the beginning.