Buying · Getting started

What it costs to get in

Most people planning a first purchase count the deposit and stop. The deposit is rarely what stops them. What stops them is the closing costs no one quoted, the reserves the lender wants to see after those are paid, and a monthly figure that only works if the rents are what the listing says.

Cash to close, on a real South Shore number

A two-family at $575,000, bought owner-occupied at 5% down.

Closing costs on a Massachusetts purchase cover lender fees, title insurance, the appraisal, recording, and prepaid tax and insurance escrows. The deed excise at $4.56 per $1,000 falls on the seller, which is one of the few things here that does not come out of your side.

Reserves are the part that surprises people. Having exactly $46,000 and spending all of it is not the same as qualifying, because the lender wants to see money left after closing. How much depends on the loan and the number of units, so ask for the figure early rather than discovering it in underwriting.

Three rules that decide what you can buy

Rule	Effect
FHA self-sufficiency	On three and four units, 75% of total market rent must cover PITI. Kills most three-deckers at low deposits. Two-families are exempt
State assistance	MassHousing and the ONE Mortgage both reach two, three and four family homes bought as your primary residence
Lead paint	On pre-1978 stock, deleading decides whether a family with young children may lawfully live there, and owners are strictly liable

The monthly figure is the real test

Raising a deposit is a one-off problem you can solve with time or help. A property that loses money every month is a recurring problem that gets worse, and no amount of assistance with the deposit fixes it.

So run the monthly before you fall for a building. Use the town's real tax rate, the rent the other unit will fetch rather than the listing's optimism, and a reserve for the roof. If the number only works with the maintenance line set to zero, the number does not work.

Where a first purchase usually goes wrong

• Trusting the listing's rents. Ask for leases and a rent roll. An under-rented building is an opportunity, but only if you know that before you offer rather than after.
• Forgetting you inherit the tenants. Leases survive the sale, and so do the security deposits and every obligation attached to them.
• Skipping the septic question. Sewered or not changes what the property can become, particularly if an ADU is part of the plan.
• Budgeting to the deposit and no further. Closing costs and reserves are most of what stops people.

Questions people ask

How much do I need to buy a first investment property in Massachusetts?

On a $575,000 two-family bought owner-occupied at 5% down, roughly $46,000 to close: a $28,750 deposit plus around 3% in closing costs. A lender will also want reserves remaining after closing, commonly two to six months of PITI depending on the loan and unit count.

Can I buy an investment property with 5% down in Massachusetts?

Owner-occupied, yes. Living in one unit opens low-deposit financing that a pure investment purchase does not get, and MassHousing and the ONE Mortgage both reach two to four family homes bought as a primary residence.

Who pays the deed excise tax in Massachusetts?

The seller. It runs at $4.56 per $1,000 of price in most of the state. As a buyer your closing costs are lender fees, title insurance, the appraisal, recording and prepaid escrows.

What is the most common mistake on a first purchase?

Budgeting to the deposit and stopping. Closing costs and post-closing reserves are usually what prevents a purchase, not the deposit itself. After that, taking the listing's rent figures at face value instead of asking for leases and a rent roll.