Boston condo buyers, today we’re going to discuss the topic of a down payment for a Boston condo..
So why do you need a down payment? One reason Boston lenders require a down payment is that they want to be certain that the borrower is financially invested in the Boston condo. In a lender’s mind, the larger the down payment, the less likely a buyer is to go into foreclosure on the loan.
Down payments may vary depending on the type of loan you’re seeking. A variety of financing options are available from conventional mortgages to government insured FHA and VA loans.
- A 20 percent down payment is usually the industry standard for a conventional loan. For example, a 20% down payment on a $300,000 Boston condo would be $60,000. While this can seem like a lot of money, a significant down payment creates instant equity for the buyer abd in most cases, not be required to purchase private mortgage insurance (PMI) thus saving money on your monthly payments.
- A lower down payment of 5 to 10 percent is sometimes possible, but will often require mortgage insurance. Private mortgage insurance, or PMI, will drive up the monthly payment but protects the lender in case of foreclosure. Once the loan to value ratio is 80 percent, you may ask to have it discontinued and the monthly payment will drop accordingly.
- An FHA loan may allow some buyers to have a down payment as low as 3.5 percent. An FHA loan is a popular choice for potential Boston condo buyers who may not have stellar credit or a large enough down payment for a conventional loan. These loans are insured by the government and the borrower will pay mortgage insurance directly to the program
Watch this video for more information on down payments for a Boston condo
How Much Down Payment Do You Need?
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