FHA loans can be good financing options for Boston condo buyers interested in acquiring condos in Beacon Hill or high rise condos in downtown Boston. As of April 2018, the maximum FHA loan amount for properties in Boston was $650K, which is higher than the median home price in this regional market. There are pros and cons associated with FHA loans. While this mortgage program has greatly contributed to increasing the rate of homeownership across the United States, it may not be an ideal method of financing for all prospective Boston condo buyers.
Here are a few advantages and disadvantages you should know about FHA loans, their terms, conditions, features, and processing times.
Lower Down Payments
A lower down payment is the most common reason Boston condo buyers seek FHA loans for a Beacon Hill condo. Ever since the crash of the housing and mortgage markets in 2008, the underwriting and qualifying standards of conventional mortgages have tightened up considerably. Many banks will only lend to Boston condo buyers who can provide a 20 percent down payment. Even those who agree to finance a loan-to-value deal with a 10 percent down payment will likely seek to squeeze more points at closing, thereby making a condo acquisition more expensive. An FHA loan will allow you to purchase a property with as little as 3.5 percent down.
Even if your down payment is close to 20 percent, you will be expected to pay for mortgage insurance until you can refinance. For this reason, you may be better off with a conventional home loan if you are able to get a loan-to-value ratio of 80 percent. On the other hand, you can keep some of the down payment with an FHA loan and allocate it toward cash reserves since you will be expected to pay mortgage insurance anyway.
Qualification and Credit Evaluation
Conventional lenders like churning out home loans that are easy to close, which means they may give up on your mortgage application if they see a blemish on the credit report or if the title search returns an issue. FHA loan underwriters tend to be more flexible with credit evaluations, and they may suggest ways to clear title and credit issues so the loan process can move forward. Whereas a conventional lender may refuse to continue processing your loan application if your credit score is in the low 600s, FHA lenders will continue to work on the file.
Loan Processing Times
FHA loans take considerably longer to close than other types of loans, and this could be an issue in a sellers’ market such as downtown San Diego. You can get an FHA preapproval you can show to the seller when you enter your bid. However, the listing agent may warn his or her client that getting the FHA loan certificate could take longer than expected due to the detailed inspections and appraisals required.
In addition to the type of loan you acquire, there are many other things to consider when purchasing Boston Beacon Hill condo where homes aren’t always on the market for long, so you need to make sure you work with a local real estate agent with the inside information you need on the latest listings. Get in touch with us today to speak with one of our trusted agents.
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Over the course of 20 years in the Boston downtown real estate market, John represented and sold numerous, condominiums, investment and development properties in Greater Boston and in the surrounding suburbs
In addition to representing Boston condo buyers and sellers, John is currently one of the most recognized Boston condo blog writers regarding Boston condominiums and residential real estate markets. John's insights and observations about the Boston condo market have been seen in a wide variety of the most established local & national media outlets including; Banker and Tradesman, Boston Magazine The Boston Globe, The Boston Herald and NewsWeek and Fortune magazine, among others.
For over 24 years, John Ford, of Ford Realty Inc., has been actively involved in the real estate industry. He started his career in commercial real estate with a national firm Spaulding & Slye and quickly realized that he had a passion for residential properties. In 1999, John entered the residential real estate market, and in 2000 John Started his own firm Ford Realty Inc. As a broker, his clients have come to love his fun, vivacious, and friendly attitude. He prides himself on bringing honesty and integrity to the entire home buying and selling process. In addition to helping buyers and sellers, he also works with rental clients. Whether you’re looking to purchase a new Boston condo or rent an apartment, you’ll quickly learn why John has a 97% closing rate.
Charles River Park
Surrounding Communities of Boston
John Ford and his staff can be reached at 617-595-3712 or 617-720-5454. Please feel free to stop by John's Boston Beacon Hill office located at 137 Charles Street.
Ford Realty Inc
137 Charles Street
Boston, Ma 02114