First-Timer Questions
Please help me avoid Wednesday night’s “Homebuying for Hipsters” event! A few things I’ve realized I don’t know but should: 1. What’s the general time-frame for buying? For instance, if I’m looking to move in somewhere by the time my lease runs out in September, have I already missed the boat? 2. I know 20%…
Please help me avoid Wednesday night’s “Homebuying for Hipsters” event! A few things I’ve realized I don’t know but should:
1. What’s the general time-frame for buying? For instance, if I’m looking to move in somewhere by the time my lease runs out in September, have I already missed the boat?
2. I know 20% is a standard down payment amount, but how often are 10% or 15% accepted? What are the disadvantages of putting down less up front?
3. I know people don’t use brokers much anymore for renting; is the same true for buying? What risks do you face not using a broker?
4. What costs are affiliated with buying that I might not think about?
5. Generally, how long do you need to live somewhere for buying to be a sound investment?
6. Any low-cost neighborhoods you think are a solid investment?
Thoughts about any of these questions would be greatly appreciated!
Id like to answer some of first timers questions from the perspective of the financing/mortgage part.
firstly in today’s market because the banks have so many refinance applications, their turn times have gone up dramatically, however they are prioritizing purchases first but know that it will take 3 to 6 weeks to get all the financing in place.
In regards to how much money you will have to put as the down payment, there are many variables,
Firstly Fannie and Freddie have added another hit to condos and coops above 75% financing so if you only put down 20% you might get a higher rate or have to pay points because of that.
also with good credit and enough income to qualify banks will lend 90% money to a buyer, yes you might have to pay pmi but if you can manage the payments and plan on staying long term in the house its definitely worth it then not having any savings left over at the end.
hidden costs that will not even show up on a good faith estimate are a few, firstly in ny most buyers have a lawyer that represent them in the purchase and this is something which you might pay the lawyer a month after closing when he sends you your final documents and the bill, most lawyers for such transactions charge in the area of 950 to 1500 dollars per transaction depending on how much work they do, and some just have a flat fee no matter how much work they put into the transaction, second item would be a home inspection, if you were buying a two family house and wanted to make sure its safe and sound, electricity, wiring, lead, asbestos floors, piping etc. this is not an appraisal as an appraisal is a fee quoted to you from the bank, and its not the same thing. There might be a few more but usually what costs you have associated the bank can outline in pretty black and white numbers.
when buying a new construction condo most developers require the buyer to pay their closing costs which can add upwards of 10k to your closing costs, but with prices dropping and developers looking to sell, i have seen many cases where the buyers were able to negotiate that the seller pays their own fees and saves the buyer a nice chunk of change.
buying a home is always a scary thing when your not guided correctly on all fronts, realtor and bank, so its very important to choose someone who is knowledgeable in their field, as they know the most up to date (or supposed to) guidelines and way to work, that being said there are bankers who know the realtor side very well as they work on both ends and vice versa, but make sure you are getting the correct information, that will be the crucial step in getting the best price, mortgage interest rate and closing costs for you.
If you have any more questions on this please feel free to contact me privately and i can lend more assistance to the matter, and help you get pre-approved etc…
I was going to suggest Kensington as well.
As for lower-cost neighborhoods, I’d recommend Kensington and Ditmas Park. Of the two Ditmas Park is nicer and has more amenities, but also is (or will soon be) more expensive.
Bedstuy and bushwick lol that’s why it’s cheap people lol
Yes NorthHeights. Many banks where minimally effected by subprime. The requirements are tighter but having good credit and liquid assets can get you approved for less than 80/20 LTV.
Just to add…
3. $25k vs sub $10k is worst case vs best case. Established $500k unit can have a closing cost more than $10k. There are many variables involved to give you a solid number. The rule of thumb is 3%-4% for the value of the unit of an established home and 4%-6% of a new. 6% is usually for Jumbo/non-conforming loans and above $1 mill (the transfer tax rate changes – you get the ‘mansion’ rate).
5. My 10 years is based on buying at the peak of the boom (2006-2007). If you bought after the crash with heavily reduced price (5%-15%) you can probably recover that in 5-10 years. But that is just a guest. No one knows how the market will exactly be in 2010 (bottomed or getting out of bottom).
Are banks still making mortgages with less than 20% down?
2. Not putting 20% will force the bank to require to get a Personal Mortgage Insurance (PMI). This is an insurance just in case you fail to pay your mortgage for some reason. You can cancel PMI once your loan is less than the 80% of the purchase price or appraised value. PMI is about $200 a month for a $500k loan.
3. There is a big difference when you buy a new construction vs established. There are large taxes involve with new construction. For example a $500k new dev would have a TOTAL closing cost around $25,000. If that was not a new construction it would be under $10k.
Other than state taxes – there are bank fees (from $500-$2500), government related paperwork fees, appraiser, lawyers, etc.
5. Minimum of 5 years IMO. Unless you get lucky in a hot neighborhood. But the appreciation in value vs your upfront cost (especially closing) would not be recovered until the first 3-5 years. In this current market I would say 10 years.
National average is around 7 years.
just to add to the unexpected cost and timeline for selling questions (and perhaps these are obvious if you’ve read the buying a house for dummies, but just in case): when you are looking, be sure to find out what the rules and regulations of the co-op are when it comes to renting and selling. some places are extremely restrictive and if you’re having trouble selling, but want to move to another city, you may need to rent it out for a period–find out the policy. also, many places charge a flip tax– find out how much it is, because in this market, it may erase whatever modest profit you might make in two-three years time.
other questions to ask in the “unexpected cost” category: find out when the last time the roof/boiler/etc were replaced, whether assessments have been made in recent years, if any are expected, and be sure to have money in reserve to pay one if it happens. in other words, if all you have is $40k, i woudln’t plan on putting it all into the down payment. they’ll show you the financials for the last two years, and i’d pay special attention to how the reserve has changed in the last year– i know multiple people who are dealing with suddenly jobless residents in their co-ops/condos who aren’t paying their share, causing the reserve to be drawn down until it can be resolved. not good!
1. Agreed. No way to know for sure. But, condo/coop will likely take less time than house/townhouse. Yes, it will take at least 60 days for everyone else to get their act together (title search, inspection, etc.) and have a closing.
2. Putting less down now means paying out more in monthly payment and definitely the amount you will pay out over time. But, you have more in your pocket now to do improvements. Besides mortgage broker (I recommend calling Wells Fargo) also speak to your tax consultant about your particular situation. It is that time of year anyways.
3. Agreed. Let multiple brokers work for you b/c they are really working for the seller. Never forget that.
4. Again, speak with a mortgage company.
5. How long to live in a home depends on the market and your financing situation. It is a crystal ball question.
6. I agree with looking for bargains in established neighborhoods in the current economic climate. If you are really planning to leave NYC within 2 years, I strongly encourage renting and saving your money to buy something when you land where you want to be.
If you REALLY want to buy, go to the class. Good luck.