Living in Boston, Massachusetts, is filled with adventure and luxury. One of the most historical cities in America, Boston has so much to offer. It’s located along the ocean and offers easy access to many beautiful beaches, including some of the best in the world. Cape Cod is just a short drive away and has pristine sand dunes, rolling waves, and stunning wildlife preserves. Similarly, the scenic mountains of New Hampshire and Vermont are just a short drive away, with world-class skiing and snowboarding in the winter and beautiful hiking trails to hidden waterfalls and vistas in the summer.
Boston has amazing things to do and ways to enjoy the city's history. Ample museums, cultural associations, and event venues host dance and live music throughout the year. Boston is also home to many critically acclaimed restaurants and high-end shopping options along Newbury Street and in Back Bay. Community events are also prevalent, with farmers' markets scattered throughout the city, a brilliant Fourth of July Celebration, boating competitions, holiday events, and more.
The homes in Boston are stunning, and there is a wide range of properties, from historic brownstones in the North End and Back Bay to luxurious new developments in the seaport and downtown area. There are also large, Victorian homes with beautifully ornate features, vibrant colors, and decorative gardens.
If you’re looking to purchase a home in the Boston area, you must understand the basics of real estate financing. Real estate financing is the means by which the buyer procures the funds for the property. Our guide will walk you through the most common methods for real estate financing and offer some tips along the way.
Conventional mortgage loan
A conventional mortgage loan is one of the most common ways people finance a purchase. Conventional mortgage loans are done through a private financial firm and are not financed through the government. They may have better rates than government loans but often have more stringent qualifications. There are two main types of conventional mortgage loans: conforming loans and non-conforming loans.
Conforming loans
Conforming loans include any loans that value at $726,200 or less. However, some conforming loans might be $1,089,300 in high-cost counties. Conforming loans are the most frequent type of mortgage loan issued. They require at least a 20% down payment on the property. Conforming loans can be issued with a smaller down payment, but the buyer may need to acquire mortgage insurance as well.
Non-conforming loans
Non-conforming loans are those that don’t meet the standards for conforming loans, such as being larger than $1,089,300 or having conditions where there is no down payment needed. The terms of non-conforming loans will vary based on the financial institution issuing the loan.
Home equity loan
Home equity loans can be a great financing option for those who already own property. A home equity loan utilizes the equity you’ve built in your original property as collateral for the loan. Home equity loans are also referred to as second mortgages because they require an additional payment to the first loan on your home. Home equity loans are typically distributed as a lump sum and have a fixed interest rate over the loan's lifetime.
FHA loan
FHA loans, or Federal Housing Administration loans, are backed by the federal government and can offer competitive interest rates and low down payments. For some FHA loans, the down payment can be as low as 3.5%, making this an attractive option for buyers who need additional financing. FHA loans also tend to be more flexible for buyers with poor credit scores, although buyers in this category will have to purchase mortgage insurance as well.
VA loan
The Department of Veteran Affairs organizes VA loans, which is an excellent benefit of military service. VA loans guarantee low-cost mortgages with limited down payments, even for buyers with poor credit scores. The VA offers a variety of mortgage options and refinancing for buyers, depending on their criteria and eligibility.
Cash financing
For some buyers, cash financing is the way to go. If you have an abundance of liquid assets and are able to pay cash for your real estate purchase, there are several advantages. First, cash offers may be more attractive to sellers, and they may offer a discount on the listing price for an all-cash offer. Purchasing in cash also saves you money in the long term, as you aren’t paying interest on the financing options.
Private money lenders
Another option is working with a private money lender. Private money lenders are often personal or business connections willing to finance a real estate purchase with their terms and conditions. This option is typically used by people who are looking for real estate investment and have a stable business network to support their ventures.
Repaying your loan
Once you’ve chosen a financing option, you’ll most likely need a plan to repay your financing. Many people simply use their typical income to pay off their mortgage, but there are other options. Purchasing real estate is a strong investment, and some buyers may choose to rent their property, either as a monthly rental or as a vacation property, to offset the cost of their financing. Boston is a popular tourist destination; many city residents rent their homes. This means there is an ample market for real estate investments to be made and rented out to help pay off the financing.
Getting started
If you’re ready to get started with your real estate journey, there’s no better Realtor in the Boston area than Jim Burton. Jim owns RE/MAX Destiny and is highly experienced in the Boston area. He understands the unique market here and has an amazing portfolio of properties to help you find the best home possible.
