Boston Real Estate: A word about Boston condo downpayments in 2022
As you set out on your Boston condo for sale journey, you likely have a plan in place, and you’re working on saving for your purchase. But do you know how much you actually need for your down payment?
If you think you have to put 20% down, you may have set your goal based on a common misconception. Freddie Mac says:
The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.
Unless specified by your loan type or lender, it’s typically not required to put 20% down. According to the Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. It may sound surprising, but today, that number is only 13%. And it’s even lower for first-time homebuyers, whose median down payment is only 7% (see graph below):
While a down payment of 20% or more does have benefits, the typical buyer is putting far less down. That’s good news for you because it means you could be closer to your Boston Back Bay condo or Beacon Hill home dream than you realize.
If you’re interested in learning more about low-down-payment options for Boston condominiums for sale, there are several places to go. There are programs for qualified Boston condo buyers with down payments as low as 3.5%. There are also options like VA loans and USDA loans with no down payment requirements for qualified applicants.
To understand your options, you need to do your homework. If you’re interested in learning more about down payment assistance programs, information is available through sites like downpaymentresource.com. Be sure to also work with a real estate advisor from the start to learn what you may qualify for in the homebuying process.
Remember: a 20% down payment isn’t always required. If you want to purchase a home this year, let’s connect to start the conversation and explore your down payment options
There are several Boston real estate blogs about purchasing a Boston condo for sale. However, some of these sources may give outdated information. For first-time buyers, this misinformation can create some strange misconceptions about the process of a Boston downtown condo
One of the most common areas that potential homeowners are typically misinformed about is down payments.
From the size of the down payment to how it impacts the purchasing process, there are several misconceptions regarding this stage of purchasing a property. To help, I’ll try to debunk the most pervasive myths they’ve seen regarding Boston condo down payments.
The most common myth I have heard surrounding down payments is that you need a large one to purchase a Beacon Hill or Boston Seaport condo for sale. You can debunk this by researching and providing the customer with multiple lenders to compare loan products while supplying them with quality educational resources. The more they can compare and learn, the more likely they will enter the marketplace rather than sitting on the sidelines.
People worry that their offer may not be as strong with a lower down payment. While it’s true that some sellers would prefer a cash offer over financing, one should not feel like their profile is less appealing just because they are taking on greater than 80% financing. Private mortgage insurance means the bank is protected, and there’s no reason for considering this type of financing inferior.
People have the misconception that down payments are not necessary for a purchase of a Boston condo and should be avoided. Down payments serve two primary functions: They let the seller know the veracity of your offer and help with negotiations. This can show financial strength. Also, down payments are a wise choice if you want to keep a home payment low and get a better interest rate for long-term financial strength.
For those unfamiliar with the home buying process, there might be a misconception that the down payment is the only thing all buyers have to put forward at the closing. In reality, there are other fees that may be charged like an inspection fee, origination fee, title and closing and appraisal fee. Homeowners and lenders should be sure to discuss these fees openly to clear up misconceptions or myths.
Downtown Boston condo buyers should keep in mind that a down payment doesn’t need to be in cash or 20% of the mortgage. For example, with a pledged asset mortgage, a buyer can entirely eliminate the down payment on the house, secure a lower interest rate and avoid private mortgage insurance (PMI) payments by pledging a stock portfolio as collateral instead of paying cash down payment/
New Boston high rise condo buyers often believe there’s no need to put down more than 20% of the mortgage. However, in a competitive seller’s market, a larger down payment creates a competitive advantage. Because of record-high prices and a strong preference for noncontingent offers, a large down payment reduces the risk to the seller that an offer will fall out of the contract due to a property not appraising at the offer value.
The one myth first-time homebuyers seem to believe is that they only have to put down three to five percent, but they forget about additional costs to acquire the home—maybe it will need new blinds, carpet and landscaping. Maybe they will have to purchase new appliances for the home. First-time homebuyers need to be made aware of the other costs associated with the purchase of a home, e.g. insurance and utilities.