The down payment on the Boston Seaport condo you hope to buy may be dependent on your situation. While many financing options exist, buyers may put down 0-20%. A higher down payment may allow you to save money over the length of your mortgage with lower monthly payments and lower interest rates. However, a lower down payment may make your purchase more achievable. Keep in mind that a down payment should not be confused with earnest money, which typically is $1,000 of the offer price and held by a broker or attorney. Earnest money represents the potential buyer’s seriousness at the time of offer and may be forfeited if certain timelines are not observed as stated in a contract.
WHAT IS A DOWN PAYMENT?
The down payment is cash representing a percentage of the Boston Seaport District condo sales price; the balance of the price comes from a mortgage loan. Lenders award Boston Seaport condo buyers who make a 20% down payment with lower mortgage interest rates, better Boston condo for sale loans, and smaller monthly payments. Bank statements are necessary to provide “proof of funds” for at least the amount required for your down payment.
WHAT ARE MY DOWN PAYMENT OPTIONS?
For those Boston Seaport District condo buyers who do not have 20% of the purchase price for a down payment, increased upfront fees, higher monthly payments, and ongoing interest may result. These add expenses to overall home ownership. In rare circumstances, some lenders provide 0% down payment loans, which come with high-interest rates, require large monthly payments, and require private mortgage insurance (PMI).
WHAT IS PMI?
PMI is a monthly premium required for all loans with less than a down payment of 20%. PMI is intended to reimburse the lender if a borrower defaults on a Boston condo loan; payments range between 0.3-1.5% of the total mortgage amount per year.
WHAT IS LTV on a Boston Seaport condo?
LTV is described as the total mortgage amount divided by the home’s value. For example, with a 3.5% down payment on an FHA loan on a $500,000 Boston condo, the remaining loan amount is $482,500. Dividing this figure by the total price results in an LTV of 96.5%; PMI monthly will be $201 for the 30-year life of the mortgage, adding $72,360 to the total home price over time.
10% DOWN PAYMENT
Down payments of 10-15% earn more favorable loan conditions. With a credit score of 620+, conventional loans are available for lower interest rates and lower monthly payments, saving money over the life of the loan. Every little bit helps, also. Even a 1% difference can make an impact. For example, a 30-year mortgage with 5% interest requires a monthly payment of $3,204, while a 4% interest rate on the same loan costs $2,902 monthly; this represents a savings of $108,360 over the length of the loan. With a 10-15% down payment:
- FHA and conventional loans are both available. Conventional loans require a higher credit score since they are not federally insured.
- With a 10% down payment, FHA loans require a credit score of 500-579+.
- PMI is required.
- If LTV is 90% or less, at signing, the borrower pays PMI for the mortgage term or 11 years, whichever comes first.
20% DOWN PAYMENT
With a 20% down payment, most people can obtain a mortgage with proof of funds. With no PMI required, the borrower saves $200-300 monthly based on the loan amount. Because there is a 20% investment, the home earns immediate equity, and the property will most likely be profitable is the owner needs to sell sooner than expected.
MORE THAN 20% DOWN PAYMENT
For those who can afford more than a 20% down payment, have benefits including increased equity and a better interest rate. Bringing a high down payment to a Boston Seaport condo for sale affords a better chance of receiving a mortgage, regardless of credit, lower upfront fees, lower monthly payments, and higher home equity from the beginning. Conversely, low down payments have the negative features of higher interest rates, increased total price of the home over time, higher monthly mortgage payments, and monthly PMI payments. First-time buyers should also remember that closing costs of up to 2-3% of the total loan amount will be required before they receive the keys to their new home.
Boston Seaport condo mortgage options
You may have some options if you find that you need more money for a down payment than you have available. Consider borrowing money from family and friends; consult your lender or financial advisor about the amount that you may receive as a gift with the amount being taxed. Investigate withdrawing a loan from your 401k or retirement account; determine in advance how this might incur a tax penalty.
Boston Seaport condos for sale
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