When market-rate home prices across Massachusetts push monthly payments out of reach, buying a deed-restricted Chapter 40B home through a lottery can be a real path to owning.
Qualifying for one requires meeting income and asset limits, winning a lottery, using a 40B-compliant mortgage, and accepting caps on refinancing and resale.
Check Your Massachusetts Home Purchase Eligibility
With those rules in front of you, you can decide whether a 40B home fits your plans, gather the right paperwork before a lottery opens, and line up financing.
What Is a Chapter 40B Home?
A Chapter 40B home is sold below market price to a household earning at or below 80% of Area Median Income (AMI, the regional midpoint income published yearly by the U.S. Department of Housing and Urban Development, or HUD). Each home carries a deed restriction that keeps it affordable for the next buyer.
These homes come from Chapter 40B, the Massachusetts Affordable Housing Law, which aims for every municipality to have at least 10% of its housing stock be affordable.
Developers get a "comprehensive permit" with more flexible local zoning when they set aside affordable units—usually at least 25% of units for households at or below 80% of AMI, counted on the state's Subsidized Housing Inventory (SHI).
A 40B property can be a single-family house, townhouse, duplex, or condo, and some communities are restricted to buyers 55 and older. New units are sold by public lottery, while existing ones come up for resale when an owner moves.
Homes from the state's Local Initiative Program (LIP) or a town's inclusionary zoning bylaws follow very similar rules, though the deed restriction recorded on each home always controls.
Who Qualifies
The Executive Office of Housing and Livable Communities (EOHLC) sets the standard eligibility rules, each project's monitoring agent checks your paperwork, and an individual project's comprehensive permit can vary slightly.
| Rule | Standard 40B home | Age-restricted (55+) home |
|---|---|---|
| Household income | 80% of AMI, adjusted for household size | 80% of AMI, adjusted for household size, or as set by the permit |
| Household assets | $75,000 | Up to $275,000, including equity in a home you'll sell |
| First-time buyer | No home owned in the past 3 years, with exceptions | Must sell your current home and live in the new one; households with a member 55+ are exempt from the 3-year rule |
| Occupancy | Your year-round primary residence | Your year-round primary residence |
Income Limits
Your total gross household income cannot exceed 80% of AMI for the city or town where the home is located, adjusted for household size. HUD updates AMI figures every spring, so always check the exact dollar limits printed in the lottery application package.
Your income is tested when you apply and must stay below the limit through your closing date. Once you close, your income can rise with no penalty.
Asset Limits
Your down payment savings count toward the $75,000 household asset cap (or up to $275,000 for 55+ communities), along with your other bank and investment accounts. Funds granted or loaned through municipal, state, or federal down payment assistance programs do not count as household assets.
Retirement accounts such as 401(k)s and IRAs count at their net cash value after deducting the taxes and penalties an early withdrawal would trigger. Saving more than the limit can disqualify you, so check your total before you apply.
First-Time Buyer Rule and Exceptions
To qualify as a first-time buyer under standard 40B rules, your household cannot have owned a home within the past three years. Reviewing first-time buyer programs in Massachusetts can also help you prepare for the wider buying process alongside a lottery.
Five groups are exempt from the three-year ownership rule:
- Displaced homemakers: An adult who worked unpaid caring for a home and family and owned a home with a partner, or lived in one the partner owned, during that time.
- Certain single parents: An unmarried or legally separated parent with custody of a minor child (or who is pregnant) who owned a home only jointly with a former spouse or partner.
- Households with a member 55 or older: Any household where at least one member is 55 or over.
- Owners of a home not on a permanent foundation: A household that owned only a residence not permanently attached to a foundation, such as a mobile home.
- Owners of an uninhabitable property: A household that owned a property out of compliance with building codes that could not be brought up to code for less than the cost of building a permanent structure.
Check Your Massachusetts Home Purchase Eligibility
How 40B Prices Are Set
Chapter 40B prices are not a percentage off market value; instead, EOHLC and MassHousing set the maximum sale price so a household earning 70% of AMI pays no more than 30% of its gross monthly income on total housing costs.
Because households earning up to 80% of AMI can buy the unit, that window between 70% and 80% of AMI gives buyers room in their budget to qualify for a mortgage and cover closing costs.
The state pricing formula uses standard assumptions:
- Household size: Priced for bedrooms plus one, so a 2-bedroom home uses the 3-person household limit and a 3-bedroom home uses the 4-person limit.
- Loan terms: A 30-year fixed-rate mortgage with at most 5% down.
- Monthly housing costs: Local property taxes, homeowners insurance, private mortgage insurance (PMI), and any condo or HOA fees.
In practice, a 2-bedroom townhome is priced for a 3-person household at 70% of AMI so that the mortgage, taxes, insurance, PMI, and HOA fee all fit within 30% of that household's gross income. A 3-person household earning closer to 80% of AMI spends a smaller share of its income on the same home.
The result is a price well below the open market in the same town. You can test how taxes and HOA fees affect your own monthly payment in our home affordability calculator.
How the Lottery Works
New Chapter 40B homes are sold through a public lottery under an Affirmative Fair Housing Marketing and Resident Selection Plan, not first come, first served. Each lottery has a set application period and often includes a public information session hosted by the lottery agent.
What to Submit
To enter, you submit a complete application package with documents verifying your income and assets:
- Tax returns for the past three years, with W-2 forms
- The five most recent pay stubs for every working adult in the household
- The three most recent bank statements
- Any other documents requested to verify income or assets
- A mortgage pre-approval letter
Developers and lottery agents cannot require you to use a specific lender for your pre-approval. With our team, an eligibility check or pre-approval starts with no hard credit pull and typically takes 1 to 3 business days once your documents are in.
Local Preference and Open Pools
Only applicants who meet all income, asset, and first-time buyer rules are entered into the drawing, and each receives an anonymous registration number.
- Local preference pool: A town that shows local need can reserve up to 70% of the affordable units for local applicants.
- Open pool: The remaining units go into an open pool for any eligible buyer, regardless of where they live.
- Two chances for local buyers: Local applicants are placed in both the local preference pool and the open pool.
- Fair housing adjustment: If minority applicants are underrepresented in the local pool compared with the surrounding HUD area, non-local minority applicants are added through a preliminary drawing until the shares match.
Who Gets Which Home
Ballots are drawn randomly for each pool to create a ranked waiting list. Units with physical accessibility features go first to households with a member whose disability requires those features. Larger units, such as 3-bedroom homes, go first to appropriately sized households in drawing order before smaller households are considered.
When your number is reached, you sign a purchase and sale agreement, complete your mortgage application, and go through the monitoring agent's final eligibility and financing review.
Mortgage Rules for 40B Buyers
You choose your own mortgage lender, but your loan must meet Chapter 40B rules and the monitoring agent must approve your financing in writing before closing. Tell your loan officer right away that the property has an Affordable Housing Restriction.
- At least 3% down: You must put down at least 3% of the purchase price. State rules also limit how much of your down payment can be a gift, so confirm the gift rule with the monitoring agent.
- Fixed rate only: The mortgage must come from an institutional lender and carry a fixed interest rate for the full term at a current fair market rate; adjustable-rate loans are not allowed.
- No more than two points: The lender cannot charge more than two points on the loan.
- 38% housing cost cap: Total monthly housing costs—principal, interest, taxes, insurance, PMI, and any condo or HOA fees—cannot exceed 38% of monthly income for a household at 80% of AMI, adjusted for household size.
- No outside co-signers: People outside your household cannot co-sign the mortgage.
Documents Recorded at Closing
Two legal documents are recorded at the Registry of Deeds alongside your deed and first mortgage:
- Affordable Housing Restriction (Universal Deed Rider): The standard statewide deed rider that sets the income limits, occupancy rules, and maximum resale price formula that stay with the home, in most cases permanently.
- Affordable Housing Restriction Mortgage: A non-financial mortgage that alerts future lenders that the home's value is capped, created after some past owners borrowed more than the restricted resale value.
Fannie Mae purchases conventional loans on properties with the standard MassHousing Affordable Housing Restriction without special project-by-project approval, as long as the document is not modified. If you are buying a 40B condo, our guide to condo loans in Massachusetts explains how lenders review the association's budget and insurance.
Programs That Can Help
You are never required to use a specific loan product, though many 40B buyers compare the ONE Mortgage program in Massachusetts, a MassHousing mortgage, MassHousing down payment assistance, and other Massachusetts first-time buyer programs. In Boston, you can also look into Boston first-time home buyer programs.
You apply for MassHousing, ONE Mortgage, or municipal assistance programs through lenders that participate in those programs. As a mortgage broker, our team compares conventional and other loan options across wholesale lenders, checks your eligibility, and can issue a pre-approval letter for your lottery application.
Refinancing, Improving and Selling a 40B Home
The deed restriction stays with the property for as long as you own it, ongoing monitoring fees apply, and refinancing, major improvements, and resale each go through the monitoring agent.
Refinancing
You need written permission from the monitoring agent before refinancing or taking out a second mortgage. Agents generally approve only refinances that lower your monthly payment or long-term costs, such as a lower fixed rate; cash-out borrowing, especially above the restricted value, is generally not approved.
Improvements
You maintain the property like any homeowner, but upgrades do not automatically raise your resale price. Get written approval from the monitoring agent before doing the work; approved capital improvement costs are depreciated over their useful life and added when you sell.
Selling
When you decide to move, you cannot list the home on the open market at a market-rate price; instead, you follow three steps:
- Conveyance Notice: Send a formal Conveyance Notice to the municipality and the monitoring agent stating that you intend to sell.
- Maximum Resale Price calculation: The monitoring agent calculates your Maximum Resale Price by multiplying the HUD Area Median Income for a 4-person household at the time of resale by the Resale Price Multiplier set when the home was first sold, plus allowed marketing fees and approved, depreciated improvements.
- 90-day resale period: The monitoring agent has up to 90 days to market the home and find an eligible buyer.
Your equity grows with area household incomes and what you pay down on the loan, not with open-market home prices.
Is a 40B Home Worth It?
Weighing a deed-restricted purchase against a market-rate home comes down to trading open-market price appreciation for a much lower entry price and monthly payment.
| Feature | Chapter 40B home | Market-rate home |
|---|---|---|
| Price | Set so a 70% AMI household spends no more than 30% of income | Set by open-market supply, demand, and bidding |
| Who can buy | 80% AMI, asset limits, and first-time buyer rule | Anyone, unless a specific loan program adds limits |
| How you buy | Public lottery for new builds, or monitored resale | Direct negotiation with any seller |
| Mortgage | Fixed rate, at least 3% down, 38% housing cost cap, agent approval | Conventional, FHA, VA, or adjustable; co-signers per lender rules |
| Refinance and equity loans | Agent approval required, usually rate-and-term reductions only | Refinance or tap equity up to lender loan-to-value limits |
| Resale value | Capped by the Resale Price Multiplier plus approved improvements | Uncapped; rises or falls with the local market |
A Chapter 40B home makes sense if you fit the income and asset caps, plan to stay for several years, and care more about a predictable, lower payment than appreciation.
It is a weaker fit if you hope to sell within a few years for a market gain, want to borrow against your equity, or would rather skip lotteries and monitoring.
Check Your Massachusetts Home Purchase Eligibility
Where to Find 40B Lotteries and Resales
Chapter 40B lotteries have firm application deadlines, so signing up for alerts early helps you catch new listings as soon as they open:
- MyMassHome.org: CHAPA's statewide portal for affordable homeownership in Massachusetts, posting current lotteries and resale listings with free email alerts.
- City of Boston Metrolist: Lists Boston-area affordable housing opportunities.
- City of Springfield Office of Housing: Posts New Home Housing Lotteries for properties in Springfield.
- Local town housing offices and municipal housing trusts: Municipal websites that post upcoming 40B lottery notices, information session dates, and downloadable PDF applications.
- Lottery and monitoring agents: Private and non-profit monitoring organizations that publish open lottery applications and information session schedules.
Gather your three years of tax returns, recent pay stubs, and bank statements now so you can request an updated pre-approval letter the moment a lottery opens.
Our team can check your eligibility with no hard credit pull, compare fixed-rate mortgage options that follow Chapter 40B guidelines, or set up a free 15-minute call with a loan officer.
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