New Rules for First-time Home Buyers
The New York Times this weekend joined throngs of other analysts and media outlets in pointing out that there are multiple culprits to the financial collapse that is now a year old—and that we, in addition to bankers and brokers or lax government officials, are partly to blame. People had fallen into the habit of…
The New York Times this weekend joined throngs of other analysts and media outlets in pointing out that there are multiple culprits to the financial collapse that is now a year old—and that we, in addition to bankers and brokers or lax government officials, are partly to blame. People had fallen into the habit of stretching their finances to buy as much house as possible for their first-time buy, the Times says, and the paper offers seven new rules of buying to replace this and other unreliable maxims of real estate. It begins with the basics—put 20 percent down, get a fixed-rate mortgage, and don’t spend more than 35 percent of your pretax income on your mortgage, property tax, and home insurance—and continues with more detailed advice such as mapping out your expenses and forecasting your future income. It’s more than we can reproduce here, but the full article is worth a read.
Seven New Rules for the First-Time Home Buyer [NY Times]
Photo by triada53
for many people it’s impossible to save money in nyc. youre nickle and dimed out the wazoo. the funny thing is i dont even know anyone in my circle of friends who has ANY savings whatsoever, and im talking people in late 20s early 30s. it’s kind of sad, but for many people a reality. a scary reality.
*rob*
OK, so what’s wrong with my picture? We have $145K CASH in the bank (by scrimping and saving over 10 years) yet still can’t manage to find our Brooklyn starter home (which for us must include room for 3 kids). It’s the monthlies that will get us…two more kids to get into public school and maybe we’ll have a chance.
there are tons of places well under $500K.
btw – i always put 20% down or more – current place is 30% . work and save your money!
saying 10% is ok under certain circumstances is funny stuff. Safe zone? Lol, if your financials are good enough in the first place then you would be able to come up with the 20% down.
The down payment percentage should not be the focus. It’s the actual amount of debt one is incurring that is key. Up to just over a $300,000 loan at 6.5% you are still paying under $2000 a month in mortgage costs. It doesn’t make any difference to your ability to make that mortgage payment whether you put down twenty percent or zero.
Come to Midwood if you’re looking for apartments under $300,000.
“Awesome, salaries are stagnant – rents are still outrageously inflated and someone has to somehow save 100k for a ‘starter apartment'”
If the price of that ‘starter apartment’ drops from 500k to 250k, then you only have to save 50k.
If 20% down is too much for the market, then the price is too high. 10% down, 5% down, 0% down were all gimmicks to avoid lowering the PRICE. Just like 1 month free, 2 month free, etc. are gimmicks to avoid lowering rental prices.
That’s the core of the real estate problem.
20% down not only keeps prices down and weeds out the people who can’t really afford the property, it also weeds out the people who don’t have the discipline to save money (and who are much bigger credit risks long term even if they’ve never yet run into payment problems)
quote:
Awesome, salaries are stagnant – rents are still outrageously inflated and someone has to somehow save 100k for a ‘starter apartment’
i thought you got the memo? the only people who can buy starter apartments these days are people with rich parents! but nyc has always been a city of renters so there’s no real shame in renting. and i should probably stop railing against parents who help their kids. i probably could have bought something today had i lived within my means for the last 10 years, but i didn’t, so i should probably just whining haha.
*rob*
I agree with Pete that you can buy safely and responsibly with 10% in the right circumstances. My “starter” apt was a one bedroom in a co-op. The board allowed 10% down and the apt price was only 220K so even with 10% down the monthly payments were within the safe zone of percentage of monthly income. A first time buyer buying a smallish apt in Kensington or Ditmas or even Clinton Hill could still do a similar thing.
how are those rules new? those are the old rules, and everyone broke them. if you can’t put 20% down you should not buy. end of story. If we want to prevent masses of underwater mortages in the future, we need to make it law. right now we’re experiencing the social cost of over-leveraged housing. It’s not about you and what you can afford, it’s about everyone else when you fail to pay.
after the great depression we made it illegal to leverage a personal stock portfolio more than 2:1, to avoid the global impact of masses of investors facing margin calls (going “underwater”) at the same time. But you can still legally leverage your house infinitely. does that make sense?
right now enforcing a legal minimum downpayment would cripple the housing market too much, but in the future it’s what we need to do, when the market has recovered enough to absorb the impact of higher financing restrictions. we can’t expect people to just “wise up”.