Saving for a Downpayment in Boston Real Estate

When considering a home purchase in Boston, it's easy to get caught up in how much to save for a downpayment. You may have even started considering your options— including credit lines. But before you exhaust all of your time learning how much will please your mortgage lender, take into account the following factors that also make a difference in your down payment:

The Downpayment

Unless you're a cash buyer in Boston real estate, there is no way around a downpayment for a home. Very few loan programs will actually allow you to buy a house without any money down. Buyers are typically putting down money of 5 percent to 20 percent when purchasing homes— but depending on the type of your loan, this can vary. "Conventional and FHA loans typically require minimum down payments of 5 percent and 3.5 percent, respectively," reported AOL Real Estate. "On a $200,000 mortgage, that's $10,000 for conventional and $7,000 down for FHA. But buyers often put even more skin in the game."

The Backup

When you've pulled together enough money for a downpayment, lenders often want to know you have enough left to keep your mortgage payments going. One way the lenders can make sure you're fit to buy a new home in Boston is to require a certain amount of reserves. Restrictions of course vary by the type of loan and the borrower, but lenders may require at least one month of reserves that would be equal to your monthly payment on a new home, including the property taxes and insurance.

The Income

Lenders will also take into account your income when you begin your homebuying process in Boston. One significant aspect they will look at is how much money you will have left over after paying major expenses— this is known as residual income. Also, "lenders will take a close look at the ratio of your major monthly debts against your gross monthly income," AOL Real Estate added. "This is known as debt-to-income (DTI) ratio, and different loan programs have different requirements."

When preparing to buy a home in Boston, it's important to get a handle on your finances and your options for a downpayment. Research the best loan types for your homeowner goals, consult your Boston real estate agent, and ask if you have questions. This is likely the most important purchase you will make; being financially prepared and thus, educated is the first step to success.

Ken Snyder

Keller Williams Realty Boston-Metro

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