Why a 20 percent down payment is so important in Boston

by Joe Ward


Boston residents and those looking to move there already know that it is difficult to find affordable housing in the area. And because housing is so expensive, being able to put 20 percent down on a home could be even harder than finding your dream home. But a 20 percent down payment might be more necessary in Boston than other cities.

Why? Because paying 20 percent down, compared to 10 percent, would make an additional 17 percent of available housing affordable to those on a median income, according to Unison, a real estate finance company. Boston has the fourth-lowest percent of affordable homes for those making a 10 percent down payment, and has the fifth-lowest percent of affordable homes available to median-income earners putting down 20 percent.

Unison’s home affordability report looks at what percent of a market’s homes are considered affordable to residents making the median income. The study then looked at how many homes are available at different down payment levels. Boston, it turns out, has one of the greatest jumps in number of affordable housing when a 20 percent down payment is included.

With a 10 percent down payment, median-income earning households can afford 37 percent of the 179,544 homes available in Boston, with a maximum home price range of $512,251 according to Unison.

With a 20 percent down payment, those households can afford 54 percent of homes, or 97,042 total homes, with a maximum home price of $613,326.

Here is how much of a Boston neighborhood’s housing stock is affordable to those making the median income of $84,955, according to Unison.

A 20 percent down payment is still considered the standard in homebuying but is certainly not required. There are misconceptions regarding the down payment, however, as 28 percent of consumers still mistakenly believe that a 20 percent down payment is a requirement of buying a home.

Even if that weren’t the case, prospective homeowners have a hard time coming up with the cash to make the standard down payment. Homebuyers under 35, who make up a sizeable portion of first-time homebuyers, can only make an 8 percent down payment on average, according to the National Association of Realtors.

While saving for a 20 percent down payment sounds daunting, it can certainly pay off in more expensive markets like Boston.

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