MAHA

Lottery Help

Q: What makes a home "affordable?"
Q: How do lotteries work?
Q: What is preference?
Q: Where can I learn about the home buying process?
Q: What is MAHA’s involvement in these lotteries?

Q: What makes a home "affordable?"

The accepted definition of “affordable” is that you do not spend more than 30% of your gross household income on housing costs. (Click for income calculator)

That means the annual costs of your mortgage (principal and interest) plus property taxes, insurance and other housing costs should not exceed 30% of what you earn annually. Families above these levels may have difficulty affording other necessities such as food, clothing, transportation and medical care.
In certain housing developments, through combinations of zoning incentives, cost-effective construction techniques, and governmental subsidies, homes are made available to households who cannot afford, based on this definition, the market prices for homes in their community. The price of these affordable units is calculated such that a household earning 80% of their area’s median income would not be paying more than 30% of that income on housing costs.

Anyone earning 80% or less of the area median income [click to find out what 80% of the median income is in your area.] is qualified to buy an “affordable” home. Because there are usually more applicants than homes, a lottery is run to decide on the purchasers. If you are qualified, based on your income, you may enter a lottery, but doing so does not guarantee you will get one of the homes. Lottery winners are chosen at random from the pool of applicants.

Once a home is deemed “affordable” it must remain that way always. This means the home cannot be sold at the going market rate, but at an “affordable” price to qualifying homeowners in the future. Of course, by the time you sell, the definition of “affordable” will go up, so you will make money on the home, but not be as much as if it were a “market rate” home.
Another limitation on affordable homes is that they must be owner-occupied. You may not rent out your affordable home.

Who qualifies for an affordable home lottery?
The following are basic qualifications followed by most municipalities. Details may vary, but generally these rules apply.

1) Total household gross income cannot exceed 80% of the area median income, based on household size. [Click here to find out what 80% of the median income is in your area.] There are usually asset limits as well, which vary by lottery.

2) The household shall not have owned a home within three years preceding the application, with the exception of displaced homemakers and elderly households (where at least one person is 55 or over).

3) The household shall have sufficient funds for a down payment and closing costs, as determined by the developer and the participating lender.

4) Household size shall be appropriate for the number of bedrooms. For example, a minimum household size of 2 persons is necessary for two bedroom units. More bedrooms mean a larger household size.

5) Household income shall be sufficient to support at least 50% of the price of the home. Not more than 50% of the purchase price shall be cash.

6) Non-household members shall not be permitted as co-signers of the mortgage.

7) Individuals who have a financial interest in the development and their families shall not be eligible to participate in the lottery.

Q: How do lotteries work?

Once town, project developer and project administrator collectively agree to hold a lottery, activities begin about 6 months prior to the anticipated first date of occupancy.

Step 1: Basic qualifications are decided and agreed upon.

Step 2: Application materials are prepared, including all forms, eligibility requirements, description of the preference system being used, and details about how lottery winners will be chosen.

Step 3: Affirmative fair marketing of the units is directed at low- and moderate-income households, including minority households. Sales prices are also “locked-in” at this time.

Step 4: Applicants for the lottery must submit all required materials by a specified deadline. The level of documentation required varies from lottery to lottery. For instance, some lotteries will let you “self-qualify.” Other lotteries require a “pre-qualification” letter from a lender. No matter the requirements, only income and asset eligible applicants who submit all required information are entered.

Step 5: Each qualified applicant is assigned a registration number. Ballots with that number are placed in lottery pools. There are different pools for one, two-, and three-bedroom units, etc. Based on size of household, applicants might qualify for more than one pool. Ballots are then drawn randomly for each pool with an applicant’s rank differing from pool to pool in which they qualify. Starting with the largest units first, homes are awarded proceeding in order down the list of randomly drawn ballots. There are usually more ballots than homes, so not every applicant ends up being a winner.

Step 6: Once the lottery is complete, applicants are given a reasonable period in which to secure financing approval. Using this approval they enter into a Purchase and Sale Agreement with the developer, and then use the P&S Agreement to get firm financial commitments from their lender.

Step 7: Once a Purchase and Sale Agreement has been signed, the developer or lender submits income and asset documentation to the Project Administrator to verify the household’s income does not exceed 80% of the area median income.

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Q: What is preference?

Cities and towns may specify local preferences for up to 70% of the affordable units. The Zoning Board of Appeals in consultation with the local housing partnership or housing committee, the local housing authority, or other town boards determines those preferences. Typical categories include:

1) Current Residents. A household in which one or more members is living in the city or town at the time of application. Proof of residency is required.

2) Family of Current Residents. Close relatives, including children or parents of a current resident.

3) Municipal/School Department Employees. Local employees such as teachers, firefighters, police officers, librarians or town hall workers.

4) Employees of Local Businesses. Employees of businesses located in the municipality.

The developer and the municipality may negotiate other preference categories or variations of the above categories so long as they do not violate fair housing laws.

If the project includes units accessible or adaptable for occupancy by physically disabled persons, preference to those units shall be given.

Q: Where can I learn about the home buying process?

MAHA’s award-winning homebuying classes are the best place to learn about the nuts and bolts of the mortgage process, working with a real estate professional, real estate attorney, and home inspector, reading your purchase and sale agreement, the role of credit and budgeting, shopping for homeowners’ insurance, etc.
You’ll be taught by professional instructors and by those who have spent their careers understanding the home buying process - homebuyer counselors, realtors, attorneys, home inspectors, insurance agents and financial planners. To find what you’ll learn in a class, click here.

Q: What is MAHA’s involvement in these lotteries?

For more than 20 years, MAHA’s mission has been to organize for increases in public and private sector investment in affordable housing and to break down the barriers to homeownership facing low- and moderate-income homebuyers.

In their role as a “trusted advisor,” MAHA’s campaigns have resulted in more than $3.3 billion of public and private sector investment in affordable housing in Massachusetts.

Through the creation of this site, MAHA is furthering its mission by assembling a one-stop shop for Massachusetts’ homebuyers in search of affordable homes.
Recent affordable home news

Click here for a list of articles covering the most critical issues in affordable housing.