Buy your Boston Home with less than 20 percent down

Are you looking to buy your first Boston home? Now would be a great time as mortgage rates are low and they are expected to climb later this year. If you haven't been able to save up enough to have a full 20 percent down payment you may think you are out of luck for purchasing your Boston home. Luckily, this isn't the case. It is possible to buy your home with less than 20 percent down, even in today's mortgage climate. Here are some tips to help you get a mortgage without 20 percent down.

Negotiate

Talk directly with your banker, you will have the best luck if it happens to be a smaller bank who writes their own loans. Be persistent and negotiate with them. They may very well agree to terms under 20 percent down.

Go for an FHA loan

A loan through the Federal Housing Administration may be the answer if you cannot come up with 20 percent down. There are looser underwriting guidelines and less-than-stellar credit scores are accepted. FHA loans are the most popular and easiest way for a first time homebuyer to get their Boston home. FHA loans are available to first time buyers with as little as 3.5 percent down and you can also roll in your closing costs, as long as the loan and closing costs don't exceed 96.5 percent of the home's fair market value. The only caveat to an FHA loan is that PMI (Private Mortgage Insurance) is required.

Look into state and municipal programs

Both Boston and the state of Massachusetts offer down payment assistance. The City of Boston offers up to 3% of the purchase price for down payment and closing costs. There is also a 3D Advantage program that offers up to $20,000 towards down payment and closing costs. If it is a foreclosed home additional support is given. Check out the City of Boston site to read more specific detail on who is eligible. The State of Massachusetts site also offers further information on the programs along with guidelines on who may be eligible.

Lower your debt-to-income ratio

The best way to get a loan successfully with a low down payment is to be financially fit. The best indicator of this is to have a strong debt-to-income (DTI) ratio. The DTI ratio is one way lenders measure your ability to make the monthly payments. They add up your monthly debt payments and divide them by gross monthly income. A DTI ratio of 43 percent or less is ideal. If your ratio is higher than 43 percent you can either increase your income or pay off your debt.

Increase your credit score

Dependent on your credit score you may be eligible for certain loans, or not. For example, an FHA loan requires a FICO score of at least 580 if using the low down payment option. What should you do if your credit score isn't so great? First ensure that the report is factual and there aren't any errors on it. A mortgage professional can also help you get things removed from it or helping you spot errors.

When you are ready to purchase your Boston home, look to an experienced Boston real estate agent. I'm committed to providing you with the highest quality buyer service. When making the type of investment that buying a home requires, you deserve to have all the latest market information and the very best advice, both of which I can provide you with. I am always here should you have a question on a Boston, MA neighborhood such as South End, Fenway, Beacon Hill, or any other. I hope to speak with you soon!

Lucas Garofalo

Keller Williams Realty

(617) 861-3631

Lucas@LucasBostonHomes.com

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