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What's the Standard Downpayment in the Hub?

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Ask a Sales Broker... is part of Curbed University's attempts to give you the best non-boring advice on buying, selling and renting in the Hub. Our expert answerer is Nick Warren of Warren Residential. Go ahead and email your questions or leave them via the Comments button to the upper right.

A reader wrote in: What's the standard downpayment in Boston?

Here's Nick Warren's answer:
Thanks for the question. The short answer is that there is no "standard" downpayment for a particular location. It really depends on two things: the borrower and the type of property. There are many different loan programs that require different minimum percentages for downpayments.

On the low end of the down payment percentage we have FHA loans, which allow you to put as little as 3.5 percent down if it's your primary residence and the loan amount is less than a certain amount. This loan amount varies depending where the home is located. For more information on loan limits in Massachusetts, go to this site. The U.S. government guarantees these loans, which is why it allows lenders to take on more risk and loan a higher percentage of the purchase price than a traditional mortgage would allow. Because the government guarantees these loans, there are a lot of guidelines and requirements that the borrower and the property must meet, so not everyone nor every property will qualify.

There are other programs that require anywhere from 10 to 30 percent minimum downpayment. The riskier the loan, the higher the percentage down is required, which is why investment properties typically require 20 to 30 percent more down. In today's market, where inventory is low and there are often multiple offers, the buyers with the strongest downpayment usually win because they are viewed as safer choices for sellers. This is why we are seeing almost 1 in 3 purchases in downtown Boston being done completely in cash with no mortgage.

My biggest piece of advice is to talk to a lender directly about your options. Our preferred lender, Brian Cavanaugh of RMS Mortgage, is usually the first person we have our clients call prior to viewing properties and submitting offers. This way, they have a clear understanding of what is required and what they can afford so we can just focus on the fun part: choosing a home they love!
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