Even during these uncertain times, the local real estate market in Boston is holding firm, and it’s still a particularly good time to buy a condo.
First of all, mortgage interest rates are incredibly low. In addition, home prices are still increasing in most neighborhoods throughout Boston and in nearby cities like Cambridge, Everett, Somerville, and Malden, so it might be a good idea to buy before prices increase even further. Still, you shouldn’t just rush out and buy in order to take advantage of these conditions – a certain amount of caution and logic is required. You need to know what you can afford, as well as what you can continue to afford to keep your head above water should you have a job disruption.
Here are 5 ways to make sure you don’t get in over your head when buying a condo in Boston.
1. First Off – Get Pre-Approved
Before you ever begin condo shopping, it’s a good idea to go to your lender and get pre-approved for a mortgage loan. This really should be your first step toward buying a condo in Boston because of all the time, effort, and frustration it can save you.
The two main reasons for pre-approval are:
- You’ll get a real dollar figure that can serve as a solid basis for determining how much you can afford. Your pre-approval letter represents the maximum amount that the bank will lend to you.
- It shows real estate agents that your offer merits serious consideration because you’ve already taken concrete steps to secure financing. Nobody will take your offer seriously if you don’t include a pre-approval letter.
Pre-approval, then, means you know what you can afford, and you will be seen by sellers as a serious buyer. Your lender will examine your credit and assess your repayment ability before granting pre-approval. And since you will know your borrowing limit, you can spend your home shopping time looking at only those houses within your price range. You’ll also have more negotiating leverage with that pre-approval letter in hand.
2. Shop at the Lower End of Your Price Range
When you know your realistic price range, another way to make sure you don’t get in over your head when buying a condo in Boston is to shop at the lower end of that range.
You don’t have to spend as much as your pre-approval indicates you can. Better to allow yourself some financial breathing room than to stretch yourself to the limit, especially if you get into a bidding war and need to offer over the asking price, which is not uncommon for a condo in (market_city]. Plus, shopping at the lower end of your price range will free up extra cash for things like remodeling and new furniture. Instead of feeling stretched when the mortgage payment is due, you can rest easy in your wonderful new condo.
3. Be Aware of the Additional Costs
To make sure you don’t get in over your head when buying a condo in Boston, you need to be aware of the many other costs, because you will wind up paying for a lot more than just your monthly mortgage payment.
Even with a newer condo, there will be maintenance costs, and it won’t be long until you will have to make larger repairs. Other inevitable costs and expenses include:
- Mortgage processing fees
- Closing costs
- Homeowners insurance
- Property taxes
- Private mortgage insurance / PMI (if you paid less than 20% down)
- Condo fees
Being aware of and preparing for these additional costs can help you make sure you don’t get in over your head when buying a condo in Boston.
4. Set Aside Emergency Funds
You obviously need to set aside reserve funds for the additional costs. But there are other ways you can get in over your head when buying a condo in Boston. For example, you might have an unexpected illness, suffer a catastrophic injury, or even lose your job. There is a ton of uncertainty and volatility with COVID-19. Still, those mortgage payments have to be made every month, and having emergency funds will help you keep your head above water.
Maybe you haven’t taken a close look at your reserve funds, but you can bet that your lender will. According to financial experts, here’s what lenders examine: “When lenders measure reserves, they take a look at the assets you have in the bank and determine how long you could continue to make your full mortgage payment in the event of a job loss or other source of financial stress. You may be required to have anywhere between one and six months’ worth of reserves, depending on the loan program you’re trying to qualify for. This means having money to pay principal, interest, taxes, and insurance, as well as any applicable condo fees.”
5. Understand Affordability
Make sure you don’t get in over your head when buying a condo in Boston – simply understand affordability. You won’t get in over your head if you know what you can truly afford. You can find a variety of calculators and tools online to help you determine your budget. And if you know the area and neighborhood where you want to buy, you can also find online estimates for the cost of taxes and insurance. We recommend, as a great way to make sure you don’t get in over your head when buying a condo in Boston, that you lean on our knowledge and expertise of our qualified local real estate agents at NextHome Titletown. Find out today how our agents can help.
Learn more about buying a condo in Boston! Contact us today for more information! (617) 657-9811
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