Let’s be honest – deciding to take the leap towards homeownership is never easy, especially in the Big Apple! But at some point or another, all people think about this. You’ve been setting aside money for rent for too long, and you believe you’d be better off paying a mortgage than someone else’s money. So, you’ve got enough money saved up – all that’s left to do is to choose your property. But as one of the many first-time homebuyers in the market, what should you be on the lookout for? Don’t worry – we’ve got a couple of tips here.
In the process of becoming a first-time home buyer, there’s one thing which is absolutely the most important – saving money. Think about it – if you want an apartment in Manhattan or Brooklyn, you’ll probably need to have money for a down payment that’s around a fifth of your purchase price. Many people find this to be a shocking fact, wrongfully believing that they could buy a place of their own with a lot less cash on hand. But if you follow the real estate trends in the Big Apple closely enough, you’ll find that this is pretty much the norm around here. If you want a bit of context – in 2019, the average sales price for a Manhattan place was around a million dollars, with the average down payment being $199,700.
Condos can sometimes come with a financing limit of about 90%, meaning that you could be looking at a 10% down payment. But even in that case, you’re not out of the woods yet. Firstly, you need to be eligible for the payment loan for the abovementioned 10%; plus, you may also need to pay into a plan for private mortgage insurance once you decide to go with a down payment that’s less than 20%.
So, what does this mean for you, specifically? Basically, it means that you’re going to have to gather some serious savings before you think about becoming a first-time homebuyer in New York City. Regardless of how you slice the mortgage, you will have to save a lot of money. Plus, there are also closing costs to consider; generally, these add up to 6% of the purchase price to your expenses. And in most cases, these are costs that you can’t delay and have to pay in cash.
Do you believe that you’re sure of what you can afford? As much as we hate to break it to you, chances are that you’re quite wrong about that. There is a series of things you need to do before you can be sure of your financial situation, at least in the context of becoming first-time homebuyers in New York City. For one – you’ll need to speak to a mortgage broker, go through the preapproval, and actually have the money in your bank account.
If you don’t know what preapproval is, don’t worry; it’s nothing difficult, and nothing to worry about. Basically, you have a lender verify the details on your income, run a check on your credit, and talk to you about your current liabilities and assets. This doesn’t take more than a day or two – and by the end, you’ll know just how much you can realistically afford. Naturally, bear in mind that this doesn’t mean you should buy the absolutely most expensive home you can possibly afford, but the process of preapproval will lay out all of the options for you.
Sure, if you’ve ever gone to an open house in your life – you know what home-staging is. And you know that the home you see when it’s up for sale is the home at its absolute best. But with that in mind, you shouldn’t be overly skeptical when you’re looking for a place in New York City. If there’s one thing that’s certainly true – it’s that the perfect place you want probably doesn’t exist. Sure, all of us have a lot of different priorities regarding our homes. But in this process, you should take a look at what your real needs are, and separate them from less important wants. This will allow you to make the compromise necessary for finding the best possible home.
Stay Confident and Don’t Fear Competition
If at any point in this process you thought that you wouldn’t receive any competition once you make an offer, we’re here to tell you that you were mistaken. One of the reasons that the prices in Manhattan and Brooklyn are always so high is the constant swerve of demand. Around here, there will always be demand for an affordable apartment with multiple bedrooms. Though, while demand has not suffered in the recent years, the home inventory has grown quite a lot in New York City in the past few years; while we’re not looking at quite a buyer’s market, you definitely have reasons to believe you are in a strong position for negotiations.
Of course, the first thing we said is still true – even if homeowners are looking at buyers with more advantages and opportunities to shop around than in the recent past, the competition among buyers is still amazingly fierce due to rising demand. With that in mind, don’t be afraid to go after a property aggressively if you want it so badly – and even more importantly, don’t beat yourself up about potentially losing it to someone else. In this market, you’ll find another one easily!
As you can see, becoming a first-time homebuyer in New York City is not a simple process. On the one hand, you need to carefully balance your personal finances to remain liquid after purchasing the property; while also taking care to find a good apartment, and beat others to it. But once you’re done with all of this – there’s truly no better feeling!
About the author
Sam Bay is a freelance author, journalist, and real estate expert. When he’s not writing about real estate agencies and moving companies like Movers 101, he enjoys water sports and a quick game of chess.