First-Time Buyer NYC? Here Are Seven Tips for You To Secure Your First New York Home

Buying a home is complicated. For a first-time buyer in NYC? Even more complicated. Here at NewDevRev, we have some helpful tips so you can confidently navigate the New York real estate market. Keep reading for our seven tips to buying your first home in NYC.

Know Your Financials

Before you can figure out where you are going, it is important to know where you are. You need to understand your financial situation before you begin shopping for a home.

Check Your Credit Score

First, check your credit score. Good credit scores mean lower interest rates on loans like your mortgage. If your score is too low, then it can mean higher interest rates or even difficulty getting approved for a loan at all. Scores lower than 620 may prove particularly problematic, with some lenders requiring a higher down payment. On the other hand, scores above 800 are considered high and can entitle you to some benefits.

If your score is too low, then you can try to boost your credit score over time by paying down your credit cards, upping your credit limit on those cards, and correcting any errors in your credit history.

Keep Track of Your Debt

Debt is a major factor in determining what you can afford. Not only does it impact your credit score as we discussed above, but also it can siphon away your income and make it difficult to save up for a down payment.

Calculate your debt-to-income ratio. If the mortgage on your home combines with your other debts to exceed 36% of your income, then most lenders would not consider you a good candidate for a home loan.

So the less debt you have–credit card debt, student loan debt, medical debt, etc–the more wiggle room you have for your mortgage.

Create Your Budget

Once you have a good handle on your financial position, it is time to figure out the budget that works best for you.

Calculate the Mortgage You Can Afford

Taking your debt-to-income ratio into consideration, you can calculate the mortgage you can afford. Use NewDevRev’s mortgage calculator tool to input your information. This information includes the possible costs of the homes you are considering and your income, as well as the length and rate of your mortgage. Then, we add in the ongoing costs that must be considered before ultimately deciding what you can afford.

Consider Closing Costs

Unfortunately, the mortgage is not the only expense that comes with buying a home in NYC. There are multiple closing costs as well as monthly carrying costs that add to the price of your home significantly over time. Be sure to do your research on these additional expenses when setting your budget.

For closing costs, you need to factor in one-time taxes and fees, such as the following:

• Mansion Tax: If the home you are purchasing is worth more than $1 million, then New York State sets a flat 1% tax on it called a “mansion tax.” However, in NYC in particular, this tax is supplemented with a progressive mansion tax that increases based on the value of your home, maxing out at 3.9% for homes worth $25 million or more.
• Real Estate Transfer Tax: This tax is placed on any transaction where real estate is transferred from one owner to another. This means it applies to condos, but not to co-ops. Typically the seller pays this tax, but if you are purchasing a sponsor unit you may be responsible for this cost unless otherwise negotiated. And, just like with the mansion tax, there is an additional NYC Real Property Transfer Tax (RPTT) on top of the standard state real estate transfer tax.
• Mortgage Recording Tax: Also known as the MRT, the mortgage recording tax must be paid when you register your home loan with the state.
• Various Fees: This includes a diverse range of charges, including bank fees associated with your mortgage, as well as real estate broker and lawyer fees if you use their services.
• Title Insurance: Purchased at the time of title transfer, this insurance is not required in New York, but is highly recommended to avoid problems down the line.

Consider Ongoing Costs

Then, after you consider these closing expenses, you also need to factor in the costs that carry over month-to-month. This includes the following.

• Common Charges: Also called maintenance fees in co-ops, common charges are a monthly bill you receive from your condo management for upkeep on the building and its amenities. The more amenities and services offered by your building, the higher your common charges. Common charges are also impacted by the size of your unit.
• Insurance Fees: Homeowners insurance is paid month-to-month and can protect your home against things like vandalism, natural disasters, and burglary. Additional coverage can be added to specifically fit your needs, but this comes at an added cost.

Only after you consider all of these costs can you accurately estimate a budget for your new home.

Get Pre-approved for a Home Loan

Before you start putting in offers, you should get preapproved for a mortgage. Completing this process upfront will make it much easier to close on a deal once you have found the home of your dreams.

Show Sellers You Mean Business

Pre-approval is a relatively easy process that only takes a couple of days. Once you find a mortgage lender, you simply reach out to them and provide them with the financial documents they need to approve your loan.

Importantly, pre-approval shows sellers that you are a serious buyer ready to make a deal. The seller will know that your price range and reliability have been pre-screened by your mortgage lender, and this adds to their confidence in you. In a competitive real estate market like NYC, every little bit of seller confidence counts.

Research the New York Real Estate Market

Once you know your budget and have been pre-approved for a loan, it is time to get to know the NYC real estate market. NYC real estate is usually in high demand, but it rose to new levels this past year. However, there are signs that finally the market may be returning to normal. So is now a good time to buy?

Check Prices Online

An easy way to get a sense of what is on offer in NYC is to check online listings. You can use any of the major websites to search for units within your price range. This can help you get a better idea of the number of bedrooms and locations you can afford within your budget.

However, this is not quite as straightforward as it seems. Sometimes units are listed low initially in order to start a bidding war. They can end up selling for far more than the listed asking price in the end. This was particularly a problem over the past year as the demand for home skyrocketed post-Covid.

Track Financial News

Covid-19 disrupted supply chains all over the world. New Yorkers, many of whom were stuck at home, working out of their cramped apartments, decided en masse to upgrade their living spaces. Many NYC residents decided to buy a larger apartment, all while failing supply chains limited the amount of new housing being built. This mismatch of supply and demand created a real estate crunch that is still impacting the city.

However, the market may finally start calming down. Over the summer, real estate sales in the city slowed an average of 25% due to anti-inflation measures instituted by the Federal Reserve, such as raising interest rates. This means buyers can once again begin negotiating instead of scrambling in bidding wars.

While this calming may not be permanent (and in the NYC housing market, that is almost a guarantee), savvy buyers can take advantage of these beneficial conditions to get the most for their money. As you continue to shop for a home in NYC, keep an eye for financial news. Having your finger on the pulse of the real estate market can save you money and time in the long run.

Work with a Real Estate Agent

Does this all sound like a lot of work? While it can be a lot to take on, there are people out there whose job is to streamline this process for you. By working with an experienced and qualified real estate agent, you can make the purchase of your first home much easier and less stressful.

What a Real Estate Agent Can Do for You

Real estate agents provide a host of services. They are experts in the available homes in NYC, as well as their surrounding neighborhoods. They can help you schedule apartment tours, and can curate a list of possible homes that meet your needs so that you waste less time searching.

Once you find the right home, an agent can help you negotiate the price and draw up a contract that works for both seller and buyer. With how competitive the housing market can be in the city, real estate agents can provide a valuable edge by creating the most appealing offer that is still in line with your budget and requirements.

Look Into Down Payment Assistance in NYC

If you are starting to feel uncertain about your ability to afford a home in NYC, know that you are not alone. This is a notoriously expensive city with a limited housing market. Because it can be difficult for first time home buyers to make their finances work, there are programs designed specifically to give you the assistance you need.

Research down payment assistance programs offered by the city. You can find a list of them from the State of New York Mortgage Agency (SONYMA). SONYMA offers low interest rate loans, funds for down payments, and advice for first time NYC home buyers who need guidance. Check if you qualify for their assistance and apply today on their website.

Get NYC Real Estate Market News at New Dev Rev

And finally, stay up to date on the real estate market and the exciting new developments reshaping NYC by reading New Dev Rev. We post articles, news updates, and listings to help you make informed decisions throughout your home buying process.