How to Get a Down Payment in the Boston Area: ‘It’s Never Cost This Much’

The average home price in Greater Boston Exceeded $1 million last July. It’s a sticker price that leaves many first-time buyers hesitant and wondering how they’ll ever set aside enough money for a down payment.

“Everyone goes through it,” said Julian Hernandez, a certified loan officer Fairway Independent Mortgage Company. “Things have never cost so much, and people are struggling to find the income to offset that. Between all of this, they’re trying to save for a down payment.”

A recent study from financial marketplace LendingTree ranked Massachusetts as the state with the second-highest average down payment requirement in the U.S., beaten only by California. The dollar amount? $85,000.

That’s nearly double the average planned down payment for buyers nationally. “The average buyer now plans to put down $45,000, a huge jump from just three years ago,” said Matt Schulz, chief consumer finance analyst at LendingTree. “Even then, it’s still less than 20 percent, and at a normal saving rate it would take the average household more than a decade to scrape together that money.”

For buyers in Massachusetts, that estimate is even longer. What should a potential buyer do?

After working with a professional to figure out how much you can afford, it’s time to decide how much to put aside for a down payment. “Start with a realistic savings goal,” says Rahel Choi, a real estate agent at eXp Real Estate in Boston. She points out that you may only need to put aside 3 to 5 percent of a home’s purchase price, depending on your mortgage provider and loan type. No matter how much you save, it is often not necessary to set aside the standard 20 percent.

“The biggest misconception when buying a home is that someone is stuck with the idea that ‘I need a 20 percent down payment to buy a house,’” explains Mounzer Aylouche, vice president of homeownership programs at Mass housingan agency that provides financing to make homeownership more affordable. “So don’t give up because you don’t have 20 percent. Do your research, get training and make sure you have a homebuyer advice certificate in hand.”

Down payment assistance in Boston and Massachusetts

When saving more than tens of thousands of dollars seems impossible, there are resources to ease the burden.

Down payment loans

Mass housing offers up to $30,000 in down payment assistance to eligible first-time buyers. The amount awarded to a buyer depends on how much he/she earns annually, compared to the average income in his country. For example, a buyer in a Middlesex County city like Lowell who makes up to $66,762 could get a $30,000 loan at 0 percent interest.

Last year, MassHousing expanded its down payment assistance program to buyers making more than 80 percent of the area median income. Now, a buyer in the same county, such as in Cambridge, making up to $205,335 can still receive $25,000 in down payment assistance, with only a 3 percent interest rate, payable over 15 years.

“We got a MassHousing loan that helped us increase our down payment from 7 percent to 10 percent, and that made us more competitive in this market,” Choi said of her own homebuying journey.

For buyers in Boston there is the One+Boston programwhich provides assistance to income-eligible buyers, as well as many other programs for first-time homebuyers in the city and state.

Subsidy for home buyers

While down payment assistance offers loans at low interest rates, grants do not require repayment. They act as financial gifts for low- to moderate-income buyers.

“I just did one for a client who got a grant from the city of Lynn to purchase property,” Hernandez said. “They gave him $12,000 for his closing costs. No questions asked.”

A mortgage lender can help you explore these options. “At Fairway we have an internal one [database] where we can search to see what’s available based on cities and states,” Hernandez said. “But outside of that, people are usually going to do their own research to try to see what would be approved and what they would ultimately qualify for.”

Places to consider in your search for grants include the U.S. Department of Housing and Urban Development searchable database from state and local programs, city-run programs, nonprofit support such as local community development corporations, grants for teachers and first responders, and any grants available from your employer, among other sources.

Money saving tips

Consolidate debts

“Where I see most people struggling is they have a lot of debt to begin with,” Hernandez said. He recommends consolidating any existing debt you have with a debt consolidation loan. Then pay off your credit card balance as it approaches the limit. Both actions can improve your debt-to-income ratio, which mortgage lenders use to assess your ability to repay borrowed money.

“Having a high balance on a debt consolidation loan does not negatively impact your credit like it would on a credit card,” Hernandez explained.

Eliminate unnecessary monthly costs

Finding cheaper or bundled insurance policies, canceling unused subscription services, and automating bank transfers to your down payment fund may be the next step. The idea is that gradual cuts over many months can get you closer to your goal.

“All these things always add up,” Hernandez said.

Madeline Bilis is a freelance journalist based in Boston, where she covers real estate, travel and design. She will always defend the city’s brutalist buildings.