Over the last couple of years, many prospective buyers of condos in downtown Boston came up short of sitting down at the closing table because the sellers’ market lasted longer than expected. In 2019, things are looking better for buyers of Boston Midtown high rise condos. According to MLS Boston midtown has one of the highest condos for sale in all of Boston. In 2019 downtown/midtown is one of the housing markets presenting the largest increases in active listings. What this means for buyers is a lower potential of having to endure bidding wars, lower listing prices, and sellers who are more motivated than last year.
Something that’s unlikely to change in 2019 is the need for buyers to come up with down payments—preferably, 20 percent of the final price—when looking at Boston downtown condos for sale. The down payment requirement may be lower in some cases, but lending flexibility tends to get a little trickier with Boston high rise condos for sale. Here are some lending aspects to keep in mind when considering purchasing Boston downtown real estate.
Loan-to-Value (LTV) Considerations
First things first: risk aversion has become a cornerstone of the mortgage lending industry, and more so when it comes to condominium high rise properties. Whenever 20 percent down payments are mentioned, they should be thought of as risk mitigation factors preferred by lenders, even though borrowers can also benefit. Banks that issue mortgages like their purchase deals to feature LTV ratios of 80 percent or lower, which means they prefer buyers who can come up with 20 percent of the home’s value. This is known as conventional lending. LTV ratios higher than 80 percent may fall into the non-conventional lending category, and they tend to be more expensive for borrowers.
FHA Condo Loans
Section 234(c) of the Federal Housing Administration’s rules allow Boston downtown condo buyers to apply for special loans on condo properties, and these are deals that can be closed with as little as 3.5 percent down. The main requirement is that the condominium tower must be on a list of properties approved by the FHA.
Similar to the FHA program, Veterans Administration home loans can be used to purchase Boston condos for sale as long as they’re on an approved list, which is basically the same as the FHA list. Most borrowers who take advantage of the VA loan program don’t make a down payment at all, but they’re expected to make payments to cover what’s known as the VA funding fee, and this could result in monthly payments considerably higher than those of conventional mortgages closed with 20 percent down payments.
Some banks will insist on 80 percent LTV loans for condos, while others will accept higher LTVs as long as they can be guaranteed by government-sponsored entities such as Freddie Mac and Fannie Mae. For example, the Freddie Mac Home Possible program offers options with LTVs as high as 97 percent, but they have a catch known as mortgage insurance, which consists of additional monthly payments borrowers are expected to make until the LTV ratio comes down to 80 percent or less as property value appreciates.
Although a 20 percent down payment is considered the norm, other options are available. If you aren’t sure how much your down payment should be, make sure you work with experienced downtown Boston real estate broker who can help you navigate the details of home financing. Trust the professionals at Ford Realty to be your expert guides on your home-buying journey. Give us a call today at 617-595-3712.
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Areas Of Downtown Boston for the purpose of this blog post include: