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I am a first time buyer looking to purchase a 1 bedroom co-op in Manhattan. I've got the place picked out and negotiated and everything.
In determining my mortgage amount, I am worried that my monthly payments will be too high. But I've been told it's best to put down as little as possible.
dont buy a coop if you ever think you may want to sell in the future.
Who is giving you advice to put down as little as possible? That thought process is part of what got us into this mess in the first place. Additionally, if you are buying a co-op, they'll most likely have rules on the maximum amount of financing allowed, usually 80% max.
What differences in down payment are you talking about that could affect your monthly payment to make it non-affordable? Are you sure you can afford the place?
I'm talking putting down 25% (very doable downpayment) versus putting down like 45% (very doable monthly payments). I'm wondering which is better in the long run.
E24, just various people, working out what saves the most money if staying in the place for 10-15 years max.
Daniel: you are young and you may be dumber than dirt but we here at se discussion boards are trying to help you.
You just thought about your mortgage and how much you can afford?
If the board wants 80% max that's what it is.
This is not the time to worry about it being too high on your monthly. Maybe it's too much of a stretch for you.
Financing is cheap right now so you should finance as much as you can, provided you dont go spend rest of the money, but invest it the market. Ino can tell you what stocks to buy
Oh Daniel. Which one are you worried about?
You pay monthly not in the long run.
Are you looking at an interest only loan or principal and interest? The more you put down the less concerned I would be about paying down principal as you have already established equity. May make the payment minimum easier for you but allow you to contribute principal each month as you see fit. Just my opinion.
Daniel, depends on what interest rate you're getting. If you're getting a rate that you couldn't realistically expect to easily match in the market with safe investments, then you want to put down as much as you can and pay it down as quickly as possible. If, on the other hand, you get a really low rate and have an investment vehicle that can provide an even better return, go ahead and borrow as much as you feel comfortable with.
You also want to make sure you have a 6-month emergency fund, in ready cash, to keep you going in case you ever face a financial crisis.
I'd put more down and get a lower monthly payment -- you'll be feeling less of a pinch making the payments every month, and it's not like high returns are easy to find these days. Get as many opinions as you can, and do what you think is best!
Thank goodness we have a pro on here now.
Daniel needs a lot of handholding, MortgageMan. Help him make the right decision.
See Daniel you have to factor an emergency fund in.
Truth, we are trying to be helpful here
We worry about Daniel because he's a first time buyer and there are so many extra expenses that pop up.
Daniel: based on your posts over the past two weeks, I have a suggestion. I call it a suggestion because I can't make you do anything. If you were my kid or brother, I would make you do this: confer with an independent financial advisor. You are simply in over your head. You do not know which way is up in the financing of a RE purchase, how this fits into your short term budget and long term savings plan or your life plan. You do not understand the fundamentals of a NYC RE transaction. And yet you are plowing ahead with the most extraordinarily large purchase of your life seeking advice from strangers as they pass. This is not a sound approach.
First, you need to understand how this all fits into your short, medium and long term financial situation and goals. That's what a financial advisor is for. Get one. Ask coworkers, family, or someone you know with a bit of money for a recommendation. I do not mean the guy at Fidelity or Chase who call you to review your investments. I mean an INDEPENDENT FINANCIAL ADVISOR. They are certified with that title. You need to do this asap. A question like the one you post here screams out for it.
Second, get a broker you trust (someone like Ali Rogers who posts frequently on this Forum). You need someone who can do some hand holding to help educate you. This is not the seller's broker for goodness sake. While "your broker" is not technically yours under NYS law (they will ultimately get a commission from the seller and thus are an agent in the technical sense for the seller), I believe you need someone there for you to explain the intricacies of NYC RE--especially coop RE. It costs you nothing and can only help.
Third, get a real Manhattan RE attorney fully familiar with coop purchases. Prepare to pay $2500-$3500. You have no sophistication in this area (and I say that not to insult in any way--it is simply a fact based on the absence of knowledge you yourself have professed on threads here) and need someone who does to explain to you what is usual, what is out of the ordinary, and what can/cannot and should/should not be negotiated in the transaction.
I fear for you brother because you seem to be careering headlong into a very serious transaction without the knowledge or assistance you need to ensure all that goes down is in your best interest.
Take kyle's advice please Daniel.
Good advice Triple_Zero and kylewest, thanks. I am getting rates in the 3.75 to 4 range.
As for the recommendations from kylewest, I agree with all of them. Of the 3 points you bring up, I already have the last one. Do you know of any contact info for this Ali Rogers? Brokers generally don't like doing a whole lot of talking unless they think they might be getting something out of it. And yes, a financial advisor is someone who I've been trying to get in for a little bit now.
"I'm talking putting down 25% (very doable downpayment) versus putting down like 45% (very doable monthly payments). I'm wondering which is better in the long run."
Daniel, if you're getting a competitive mortgage rate, stick with putting down 25%.
I don't know what your employment or income situation is, but I've had friends in this recession who were burned pretty badly following the prevailing wisdom of paying down as much debt as possible at the expense of keeping it in savings.
I don't care who you are or what you do for a living, but if you depend on EMPLOYMENT to pay your bills, you are vulnerable (particularly at the higher income levels) of losing your job at any moment these days. And it's taking many people YEARS, if not months, to replace those incomes.
My advice, particularly as someone who's also BTDT: Hang onto as much cash as you possibly can, if you can comfortably handle the monthly payments. Why? If you lose your job, you'll wish you had that cash to draw upon for living expenses. Once you've given it to the bank, you can never get it back.
And don't think you would be able to draw on your home equity. Who knows if there's another real estate downturn around the corner, ready to eat up whatever equity you might have.
Another problem with our current financial climate (and the way banks run these days) is universal default; if you pay your phone bill or cable bill even 15 days late, the bank will clamp down on your credit cards and home equity lines of credit, so even if you DO have equity -- and an equity line of credit -- you cannot touch it.
Moral of the story: As the bank giveth, the bank can taketh away.
Hang onto the cash.
First of all, you need to retain two years of living expenses liquid.... Mortgage, maintenance and living. Figure out what that amount will be, and plan accordingly. Two years will satisfy many boards, and will give you time to look for another job should you lose yours, and decide to sell without pressure if you need to. A board doesn't want a tenant to create problems for the rest of the building, so be considerate of your neighbors and have a solid personal reserve fund.
No board will allow you to refinance a higher mortgage amount - only to get a lower rate on the same amount. I agree with Matt - banks also will not let you touch your equity. At the end of the day the idea is to actually pay off the loan, not milk it.
Daniel, I can be reached at ali [at] dgneary [dot] com.
I have met a lot of wonderful clients through this board, and one of my ways to pay back that good karma is that I'm willing to have short conversations with people who might not necessarily engage me. So I'm happy to walk through your situation without/before starting the meter running!
Just please put "streeteasy" in the subject line so I can find it.
DG Neary Realty
you're willing to have short conversations with people without them first agreeing to hire you?
do you realize how ridiculous that sounds?
Sounds like a recipe for theft.
Thank you very much, Mr. Neary. I will be contacting you. :)
wait, who's Mr. Neary?
Re: My advice, particularly as someone who's also BTDT
Arent you LGTB?
Daniel: Ali is a "Ms." Not a "Mr." Her agency, not her name, is DG Neary. And I think what she was saying in a joking way was there need not be any pretense that you are necessarily going to work with her for her to be willing to chat with you briefly.
He wrote me. Probably not old enough to remember Ali McGraw.
Many apologies for the mistake in sex.
no worries, I'm used to it!
mistake in gender, Daniel.
a mistake in sex is not using a condom.
You should put down the 25%, because if you are worried about the payment and have the available funds to put down an additional 20% later, you can always recast your payment after a lump sum payment for a fee around $500. This means the bank will now take your current balance and amortize it over the remaining term of the loan. Just make sure the bank you go with offers this option.