Dear Kimmi: How Much Down Payment Do I Need to Purchase a Home?

My whole life I’ve wanted to be Dear Abby and offer people my advice (even when they didn’t want it). Now I get to be Dear Kimmi, a guide to the Boston real estate market. This is my tribute to the late, great Pauline Phillips, aka “Dear Abby.” Thanks for telling it like it is.

Have a Boston real estate question? Just ask me. All questions sent to me will be answered and we’ll be regularly featuring a lucky someone’s question in this blog and our newsletter.

Keep in mind, I am not a lawyer nor will I pretend to be one like that guy on “Suits.” All comments made by me are either my opinions and/or are based on my experiences & expertise as a Realtor. They should not take the place of legal advice.

Dear Kimmi: How much of a down payment do I need to purchase a home? 

– Kathy F.

Dear Kathy F.,

There are many different types of loan products out there right now. Some like FHA and Mass Housing loans only require a minimum of 3% down. With these types of loans you are limited to the amount you can borrow and the property must be approved for those loan types. There are also some restrictions as to the type of property. If it’s a condo building then it must have at least a 50% owner occupancy rate and less than 20% commercial space in the building. You must reside in the residence as well. Investors looking to rent out their unit will not qualify. As with most loans if you are putting less than 20% down you’ll have to pay PMI or MIP, both forms of mortgage insurance.

If you are looking in areas with high demand you’ll most likely run into multiple offer situations. These loans with such a low down payment are not considered as strong and many people using these loans get beat out by the competition.

The magic number to most banks (and sellers) is a down payment of at least 20% and a credit score of at least 740. This will allow you to borrow higher amounts, avoid most restrictions and qualify you for a conventional loan.

There are new products offering jumbo loans (any loan over $465K) with as little as 10% down. The mortgage rates tend to be higher on jumbo loans because the risk to mortgage companies is higher. Still, even at the higher rates they are the lowest they’ve ever been.

Want to see today’s mortgage rates?

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