First Time Home Buying 101: NYC Edition
The city of dreams can also be a dream-crusher for those who want a piece of real estate to call their own. It's no secret that New York City is getting more and more expensive as time goes on and virtually impossible for those on average salaries - or so they say. If you are one of those who are striving to own a piece of New York real estate, read on for some useful tips on how to attain your home-ownership dream without having to sacrifice your love for the greatest city in the world. First thing is first: what can you actually afford? Sure there are a ton of resources available online which can help you determine what your monthly mortgage payments will be by estimating several factors, but some things you need to consider when looking at those figures are:
What are the banks actually willing to lend you?
As mortgage calculators will more often than not default to the best possible rates, is your actual credit in good standing to be able to qualify for those competitive rates in today's market place?
So before you start drooling over your dream kitchen which opens up to a grand living room featuring exposed brick, get a closer idea of what you would be able to take on by getting a pre-approval; a good place to start here would be to contact your current bank and ask them if they have first time home buyer programs. If they do, make sure to ask them about specifics (what percentage do you need to put down, is there closing cost assistance, what pre-requisites there are to be able to qualify, etc). Even if you don't end up moving forward with that specific bank, you will be able to (1) be taken seriously by real estate agents when you do reach out to view properties (in NYC, most sales agents ask for a pre-approval letter before even scheduling an appointment) and (2) have a realistic game plan in place. The next thing you have to think about is where you actually want to purchase said property. As much as you love having dinner nights out in Hell's Kitchen, do you actually see yourself there 24/7? Will you still be working in Murray Hill 3 years from now? You should project to stay in your purchased apartment for at least 5 years and chances are a lot can happen in those 5 years so think long term about the location of your future oasis. Another thing you really want to keep top of mind when figuring out location is appreciation. It's New York City so the property appreciation odds will most likely be in your favor wherever you choose to go, but to get maximum ROI (once you are ready to sell) the best move is to go to those emerging neighborhoods. Though the responsibilities that come with home-ownership aren't for everyone, the big picture really revolves around the long-term financial security it provides. So instead of dishing out $2,800 or more on studio apartments in SoHo every month, look to the untapped neighborhoods and settle some roots there for a couple of years. Once that gains equity and you are ready to move into another space (maybe you're married now so that bachelor pad no longer does it) you have the ability to do so without having to worry about higher sales prices on bigger apartments.
You should also consider that with high real estate prices also come high prices of living; meaning neighborhoods with expensive apartments typically tend to have more expensive local businesses as well such as grocery stores and cafes. Though this isn't a deal-breaker for most, it is something to keep in mind when you are projecting your financial situation and how your move will affect your bottom line. Parallel to where you want to purchase, is the what you want to purchase. If you're single you're probably leaning towards studios, if you're a couple you most likely have a 1 bedroom minimum, so on and so forth - and while this is obviously a great starting point you also need to think about the kind of property you will feel comfortable in. There are a number of aspects to factor in here including walk-ups vs elevator buildings, pre-war vs new builds (possible tax abatement, anyone?), pet friendly vs not pet-friendly, etc but perhaps the most important is co-ops vs condos vs multi-families. Co-ops are a bit stricter in the approval process, condos are a bit more difficult to come across, and I most likely have completely thrown you off with the multi-family option (but it is possible) - so lets explore each one of these a bit further.
Co-ops - the key thing to remember here is that you don't actually own a co-op, you own shares in the building which equate to the space of the building you occupy. Due to this, co-ops have a tougher process for those looking to buy in to the building which include a slew of questions that can become invasive for some prospective buyers. On the other hand, since this process is set forth for all residents, you can be assured everyone has been vetted through and through which can accomplish a feeling of safety for some.
Condos - condos tend to be pricier than co-ops which may cause prospective home-buyers to shy away from these buildings, but the plus side is that you own your apartment which provides more lenient rules. In addition, the process for making alterations to your unit tends to be smoother in a condo vs in a co-op. For those looking to rent out their apartment at some point, the condo is [without question] an attractive purchase as the rental restrictions in co-ops make it difficult to have this as an option.
Multi-families - it probably sounds crazy to mention anything other than apartments when discussing New York real estate, but remember those emerging neighborhoods I mentioned earlier? There are neighborhoods in New York City where there is still a chance to buy in to these multi-families so that you can become the landlord and increase your equity at an even faster speed. How? By including rent from the additional unit(s) as part of your income which then increases the size of the loan you can take out. This allows you to finance these properties in the same way you would an apartment. Important to note that even though you save on common charges you would otherwise have to pay in a condo or co-op, with great power also comes great responsibility so owning a multi-family may not be the best option for everyone, but it's important to keep your options open when figuring out your New York real estate purchase plan.
As needless as this may be to say, real estate in New York is unlike any other market. The behind-the-scenes requirements for grabbing a bite of the Big Apple are competitive and therefore any arrangements, negotiations, and/or procedures that you may be able to get away with in other places are not available (or even fathomable) in NYC. This is where choosing the best real estate agent comes into play - trusting the advice, guidance, and knowledge your agent can provide you with is pivotal in the process. Not only do they know the real estate markets across New York City, but they can also advise you on the mortgage process, first-time home-buyer programs, which banks would likely fit your needs best, what offers would and would not be taken seriously, and what kind of apartments would be appealing to you among other things.
We hope this guide has provided some information on what your next step should be in buying your first home in NYC and when you're ready to make your move (or just get some expert guidance) feel free to contact us and one of our team members will be more than happy to help.
Best of luck!
Written by: Jacqueline Martoral
President of Marketing | Play Realty & Marketing Group © 2016 EndFragment