If you are looking to purchase a home in New York, take a look at these proven steps for New York first time home buyers.
The New York real estate market is among the hottest housing markets nationwide – with 199,975 residential properties sold over the past 12 months at an average price of $760,720, it remains one of the most fast-paced and competitive living areas in the US.
Thanks to its economic opportunities, iconic landmarks, vibrant nightlife and cultural diversity, the State has proven to be one of the most opportunistic and exciting places to live.
So, if you are a New York first time home buyer, and you are looking to purchase your dream home in the Big Apple, take a look at these proven steps to turn your vision into reality.
5 Proven Steps For New York First Time Home Buyers
Step 1: Assess Your Financial Situation
The first step you’ll need to take if you are a New York first time home buyer is to assess your financial situation. It will help you evaluate your budget, as well as manage your expectations when it comes to taking a mortgage.
Here’s what you will have to do:
Check Your Credit Score
Your credit score plays a huge role during the application process as it determines how much you can borrow, as well as the rates and terms you can qualify for.
Ideally, you should have a score of at least 680 to secure better rates, but +700 can put you in an even more favorable position. You can get a free credit report from one of the major bureaus – Equifax, Experian or TransUnion.
If you have a lower credit score – between 500 and 580, you may be able to qualify for an FHA loan – a type of mortgage insured by the Federal Housing Administration, which is ideal for low-income families.
If you are not familiar with the credit score range, this summary can give you a better idea on what is your financial position:
- Excellent Credit: 750 – 850
- Good Credit: 700 – 749
- Fair Credit: 650 – 699
- Poor Credit: 600 – 649
- Very Poor Credit: Below 600
Calculate Your DTI Score
If you are a New York first time home buyer, make sure to calculate your DTI ratio before applying for a home loan. This financial ratio is used by lenders to assess your creditworthiness, and determine your overall risk as a borrower.
The DTI ratio is the percentage of your monthly gross income that goes to paying monthly debt payments – or put simply, it tells lenders how much of your money is already being used to pay off debts.
As you might have guessed already, the lower it is, the better – it means that you are not using a big percentage of your income toward debt, and you will be able to handle your mortgage payments without risk of defaulting.
To calculate it, simply add up your monthly debt payments, divide by your monthly gross income, and multiply by 100 to get a percentage. For example, if your monthly income is $5,000, and your monthly debt is $1,500, you have a DTI of 30%.
Ideally, lenders will look for a DTI of 36% or less.
Determine Your Budget
As a New York first time home buyer, a part of assessing your financial health will be to determine your budget, and make sure that you are looking for houses within your range.
In addition to calculating your DTI ratio and evaluating your income, you can use the 28/36 rule to determine your home affordability.
It means that you should spend no more than 28% of your gross income on housing costs, and your total debts (including your mortgage) should not exceed 36% of your income.
For example, if you are earning $5k a month, you shouldn’t spend more than $1,400 on your mortgage and other related housing expenses. If you already have $500 in monthly debt payments (credit cards, car loan, etc.), you’d still stay within the 36% DTI ratio.
Step 2: Find The Right Mortgage
Once you’ve assessed your financial situation, the next step of becoming a New York first time home buyer will be to find the mortgage that fits your needs the best. Here are some of the most common options:
- Conventional Loans – Traditional home mortgages are not backed up by a government agency, which means that the terms and conditions are defined by lenders and financial institutions. Conventional loans are flexible when it comes to loan amounts, and mortgage insurance is not required.
- FHA Loans – Designed for low-income buyers and backed by the Federal Housing Administration, this type of mortgage is more lenient in terms of credit score – meaning you can apply with a score between 500 and 580. However, you will be required to pay a Mortgage Insurance Premium.
- VA Loans – If you are a qualified veteran or an active duty of the military, you might qualify for a VA loan – a type of mortgage backed by the Department of Veteran Affairs. You can use the loan to construct, buy, repair, or refurbish a home.
- Jumbo Loans – If you are a New York first time home buyer, but you are looking to purchase a luxury property, a jumbo loan may be the right fit for you. This mortgage type falls above the financing limits set by the FHFA, and it’s ideal for financing the purchase of high-end properties.
If you are not sure which home loan is right for you, let us help you. Jet Direct Mortgage offers a wide range of mortgage programs, and unmatched customer service to ensure that the home-buying process is as hassle-free as possible.
Step 3: Get a Mortgage Pre-approval Letter
Now that you have found the right mortgage as a New York first time home buyer, it’s time to get a pre-approval letter from your lender. A mortgage pre-approval is a formal document from a financial institution stating how much they are willing to lend you.
It’s based on a detailed review of your credit, income, debts and assets, and it’s extremely important in New York’s competitive market. It shows sellers that you are a serious buyer, strengthens your negotiating power, and helps speed up the buying lender.
To get pre-approved, you will need to show:
- Proof of Income – Such as pay stubs, tax returns and W-2 forms
- Proof of Employment – Including a written or verbal verification
- Proof of Assets – Such as bank statements or gift letters
- Financial Information – Credit history, debt information, etc.
And of course, you will need to show your proof of identity and residency. Once you’ve gathered all the documents, you can apply for pre-approval – if everything checks out, you will receive a letter specifying the loan amount and the interest rate you qualify for.
Step 4: Begin Your Home Search
Now comes the fun part – finding your dream home! As a New York first time home buyer, you will probably have your must-have criteria that the house will need to meet. You may choose to look for a home using a real estate agent, or through FSBO.
When searching for your dream home, make sure to:
- Create your list of non-negotiables, and a list of nice-to-have features
- Set a budget and stick to it, leaving room for unexpected costs
- Visit potential neighborhoods at various times to get their feel
- Use online tools for research, such as Zillow and Trulia
- Attend open houses and showings, taking note of everything
If you’re looking in New York City, be aware of the differences between co-ops and condos. Co-ops are often more affordable, but they have strict board approval processes and policies. Condos give you more freedom but are usually more expensive.
Step 5: Make an Offer And Close The Deal
Once you’ve found your dream home, the next step is to make an offer! As a New York first time home buyer, you may feel that there is no room to negotiate, but there always is!
Decide on a competitive price and offer terms based on the fair market value and your budget. Then, draft a letter that includes price, terms, and contingencies. Finally, negotiate effectively to reach an agreement with the seller.
Ready to purchase your dream home? Apply here for your mortgage!
FAQ
What are the closing costs in New York, and how much should I budget for them?
In New York, closing costs typically range from 2% to 5% of the home’s purchase price. These costs include attorney fees, title insurance, appraisal fees, taxes (including transfer taxes and mansion tax for homes over $1 million), and lender fees.
Buyers should budget accordingly, estimating between $10,000 to $30,000 or more, depending on the property’s price and location.
What are the property taxes in New York?
Property taxes in New York vary significantly based on location. In New York City, property tax rates are relatively low, averaging around 0.88% of assessed value. However, in other parts of the state, such as Long Island or upstate New York, rates can range from 1.7% to 3% or more.
Factors like local government budgets, school funding, and property type influence the final tax bill in each region.
How long does the home-buying process take in New York?
The home-buying process in New York typically takes around 60 to 90 days from the time an offer is accepted to closing. This timeline can vary depending on factors such as financing, property inspections, and legal reviews.
In competitive markets, finding a home may add weeks or months. Delays may also arise from co-op board approvals or title issues, extending the overall process.
What should I look for during a home inspection?
During a home inspection, look for structural issues like foundation cracks, roof condition, and water damage. Check the electrical, plumbing, and HVAC systems for functionality and code compliance. Inspect windows, doors, and insulation for energy efficiency.
Pay attention to the age of appliances and potential safety hazards like mold or pests. A thorough inspection can reveal hidden problems before purchase.
Experienced Chief Operating Officer with a 20 + year demonstrated history of working in the banking industry. Skilled in all aspects of the residential mortgage market . Strong business development professional with a Bachelor of Science (BS) focused in Business Administration and Management, from St. Joseph College. A direct endorsement underwriter and a licensed Mortgage Loan Originator.
