Need some help and advice regarding my desire to purchase first condo or co-op. Currently looking at Brooklyn, UES, or potentially Hoboken/Jersey City. I am in my late twenties, in a long-term relationship and looking to buy with my partner. We have about $45K saved together for a down payment, and our combined income is about $100K/yr with good to excellent credit. Ideally, we would like to look... [more]
Need some help and advice regarding my desire to purchase first condo or co-op. Currently looking at Brooklyn, UES, or potentially Hoboken/Jersey City.
I am in my late twenties, in a long-term relationship and looking to buy with my partner. We have about $45K saved together for a down payment, and our combined income is about $100K/yr with good to excellent credit. Ideally, we would like to look for a 2-bedroom place and rent out one of the rooms to help build our wealth. We are still young & social enough that we don't mind having a roommate situation, especially if it helps with affordability.
For the home we are looking for, we probably only have about 10% down right now. Is it worth moving forward at this point to lock in rates, or does it make more sense to keep saving for 20%? Since financing is so cheap right now, I'm wary of tying up more cash in a down payment and waiting as prices and rates go up.
Also, is FHA financing the right direction for us, or could we also obtain 90% financing through a traditional mortgage?
Any advice is appreciated!
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My gut reaction: Wait it out until you have at least 20%, and have reasonable additional savings (minimum of 6 months living expenses). Generally, a $450k 2-br isn't going to be very desirable, either from your point of view, or your potential tenants (most likely will have only 1 bath, for example).
While I hope your relationship turns into a truly long-term one, you're young, and a lot can still be in flux: job locations, financial situations, personal interests, etc., all of which only add to the financial and emotional expense of house/condo/co-op ownership.
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Response by streetsmart
about 13 years ago
Posts: 883
Member since: Apr 2009
90%financing requires mortgage insurance which in your case could be an extra $300.00 a month.
No need to go FHA, a conventional bank should do it.
Wait until you have 20%. No question. And wait until you can go it on your own and don't need to have a roommate, which seems like an ok idea in theory, but will get old very quick. And why not start with a one-bedroom?
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Response by downtown1234
about 13 years ago
Posts: 349
Member since: Nov 2007
Short answer is that in Jersey City or Hoboken, its possible. A stretch in Brooklyn. No way on UES.
Not sure how things are now, but when I bought in NYC in 2011, it was all but impossible to get 90% financing. Even if you could find a lender willing to lend you 90%, I'm not aware of a single coop (which is all the inventory on the UES) that will let you finance 90%. Also, depending on whether you buy a condo or a co-op, you need to have another 2-6% of the purchase price for closing costs (higher for condo; lower for coop - review this link for details. http://www.elliman.com/reports-and-guides/guides/new-york-city/closing-costs). In addition, my understanding (others feel free to correct me if I am wrong) is that virtually coop requires significant cash in the bank after closing. Lastly, finding a 2 bedroom for $450,000 on the UES is going to be very difficult, if not impossible. Even a 1 bedroom for $450,000 on the UES seems unlikely.
On other thing to consider - buying in Hoboken/Jersey lets you avoid paying NYC income taxes (roughly 4.0%) which makes your money go further.
I'm not trying to be negative, just realistic. NYC real estate is tough.
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Response by crescent22
about 13 years ago
Posts: 953
Member since: Apr 2008
Even if affordable, it does not make sense to put all your available capital into something as illiquid as an extra bedroom.
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Response by Consigliere
about 13 years ago
Posts: 390
Member since: Jul 2011
Not smart IMO, even if you could find the place and be approved, you want to sink your whole savings into a residence without a rainy day fund.
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Response by alanhart
about 13 years ago
Posts: 12397
Member since: Feb 2007
You should wait until you're married.
Unless you're some kind of homosexualists, in which case:
a) if two men, you'll split up before your first insurance renewal
b) if two girls, you'll need a 3 bedroom so fast -- for all the cats and hummus and woodworking tools -- that a 2BR doesn't make sense.
c) for other combinations, you're on your own.
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Response by West34
about 13 years ago
Posts: 1040
Member since: Mar 2009
Re: for all the cats and hummus and woodworking tools
Look into a 2 family house. You may have to move a little further out. This way when you rent you have your own space.
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Response by alanhart
about 13 years ago
Posts: 12397
Member since: Feb 2007
Those go in the Lezbaroo Room, a bar upstate in a wood-dyke converted old service station.
Con, my favorite Woody Allen movie. Best watched in double feature with The Twelve Chairs.
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Response by nyc_sport
about 13 years ago
Posts: 820
Member since: Jan 2009
$45K, after closing costs, expenses, etc., does not leave much of a downpayment even at 10%.
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Response by iluvappa
about 13 years ago
Posts: 49
Member since: Apr 2012
Do you have enough for closing cost? Most people suggest 20% but it really isn't necessary. Under FHA you can close w 3.5% down and Wells Fargo conventional minimum is 5% down.
I'm in the same situation as you except I'm purchasing solo. I put an offer in a condo and putting 5% down. I rather put my "rental money" to something I actually own.
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Response by West34
about 13 years ago
Posts: 1040
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Re: Under FHA you can close w 3.5% down and Wells Fargo conventional minimum is 5% down.
On a NYC condo?
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Response by iluvappa
about 13 years ago
Posts: 49
Member since: Apr 2012
@West34, yes on NYC condo. Chase bank also does it but I heard mixed rumors about it. I think if your mortgage broker is good they can get it for you. I just got a quote from chase bank for 5% downpayment conventional on a condo.
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Response by Snuffles
about 13 years ago
Posts: 173
Member since: Apr 2010
i don't mean to pry.But when you say 'partner' it implies not married (ie BF/GF, BF/Bf, GF/GF i don't really care), you don't want to buy a place together. Break-ups happen and the last thing you want is locked up capital and inability to sell b/c you can't get all signatures out of spite at closing/contract.
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Response by Consigliere
about 13 years ago
Posts: 390
Member since: Jul 2011
Snuffles,
It's call divorce, it is pretty prevalent in society.
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Response by cdrm1980
about 13 years ago
Posts: 88
Member since: May 2012
Snuffles: are legally married couples who later seek divorce more prone to cooperate when they part ways as opposed to unmarried couples? If so, that's news to me.
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Response by MovinOut123
about 13 years ago
Posts: 1
Member since: May 2013
Hi Everyone,
Thanks so much for your advice. I guess I should have clarified a few things:
- The $45K is what we have saved specifically towards a down payment, we have additional savings for closing costs and living expenses, etc.
- Our jobs are both stable and long-term, and I expect my salary to raise pretty steadily over the next few years
- We currently live with another couple (our best friends) and enjoy it very much, we would be continuing to live with them but getting paid rent from them
- We are not married, but have been together for 4 years and our relationship is more stable than most marriages I know (sadly). Only reason we are delaying marriage is because we want a nice wedding and are currently saving for other, more pressing goals: a home while we are still in a buyers market, and for graduate school for an MBA
Maybe this changes some opinions? We could wait and save more than 10% down, but I'm afraid to miss the opportunity to buy now. I guess the challenge is the co-op boards, so maybe a condo is the way to go?
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Response by switel
about 13 years ago
Posts: 303
Member since: Jan 2007
Snuffles is right.
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Response by Sunday
about 13 years ago
Posts: 1607
Member since: Sep 2009
MovinOut123, first time buyers I know tend to underestimate or fail to account for:
1. Closing costs
2. Remodeling cost (even when it's in move-in condition, there seems to be always something to fix or change)
3. Appliances (large and small)
4. Furniture
5. The size of all the monthly and quarterly bills: Insurance, RE Taxes, Utilities, Maintenance
As a result, almost all of them end up getting loans from their parents or siblings. As far as I know, none of them have paid back all those loans. The siblings tend to get paid back first after 3 to 5 years, the parents will probably never see the money again.
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Response by NYCMatt
about 13 years ago
Posts: 7523
Member since: May 2009
Assuming you will have at least $20K in post-closing liquidity, you can afford a home up to $225K. I wouldn't even know where to begin looking for a 2 bedroom anywhere in the city at that price point.
And don't even consider a co-op if you're planning on running a boarding home.
See this thread for a similar financial situation:
http://streeteasy.com/nyc/talk/discussion/35298-should-i-buy-or-rent
My gut reaction: Wait it out until you have at least 20%, and have reasonable additional savings (minimum of 6 months living expenses). Generally, a $450k 2-br isn't going to be very desirable, either from your point of view, or your potential tenants (most likely will have only 1 bath, for example).
While I hope your relationship turns into a truly long-term one, you're young, and a lot can still be in flux: job locations, financial situations, personal interests, etc., all of which only add to the financial and emotional expense of house/condo/co-op ownership.
90%financing requires mortgage insurance which in your case could be an extra $300.00 a month.
No need to go FHA, a conventional bank should do it.
Ellen Silverman
E.S. Funding Co.
Licensed Mortgage Broker since1990
www.esfunding.instantlender.com
NMLS# 60631
Wait until you have 20%. No question. And wait until you can go it on your own and don't need to have a roommate, which seems like an ok idea in theory, but will get old very quick. And why not start with a one-bedroom?
Short answer is that in Jersey City or Hoboken, its possible. A stretch in Brooklyn. No way on UES.
Not sure how things are now, but when I bought in NYC in 2011, it was all but impossible to get 90% financing. Even if you could find a lender willing to lend you 90%, I'm not aware of a single coop (which is all the inventory on the UES) that will let you finance 90%. Also, depending on whether you buy a condo or a co-op, you need to have another 2-6% of the purchase price for closing costs (higher for condo; lower for coop - review this link for details. http://www.elliman.com/reports-and-guides/guides/new-york-city/closing-costs). In addition, my understanding (others feel free to correct me if I am wrong) is that virtually coop requires significant cash in the bank after closing. Lastly, finding a 2 bedroom for $450,000 on the UES is going to be very difficult, if not impossible. Even a 1 bedroom for $450,000 on the UES seems unlikely.
On other thing to consider - buying in Hoboken/Jersey lets you avoid paying NYC income taxes (roughly 4.0%) which makes your money go further.
I'm not trying to be negative, just realistic. NYC real estate is tough.
Even if affordable, it does not make sense to put all your available capital into something as illiquid as an extra bedroom.
Not smart IMO, even if you could find the place and be approved, you want to sink your whole savings into a residence without a rainy day fund.
You should wait until you're married.
Unless you're some kind of homosexualists, in which case:
a) if two men, you'll split up before your first insurance renewal
b) if two girls, you'll need a 3 bedroom so fast -- for all the cats and hummus and woodworking tools -- that a 2BR doesn't make sense.
c) for other combinations, you're on your own.
Re: for all the cats and hummus and woodworking tools
you left out Subaru spare parts
http://www.youtube.com/watch?v=tFCTx1PFchY
Look into a 2 family house. You may have to move a little further out. This way when you rent you have your own space.
Those go in the Lezbaroo Room, a bar upstate in a wood-dyke converted old service station.
Con, my favorite Woody Allen movie. Best watched in double feature with The Twelve Chairs.
$45K, after closing costs, expenses, etc., does not leave much of a downpayment even at 10%.
Do you have enough for closing cost? Most people suggest 20% but it really isn't necessary. Under FHA you can close w 3.5% down and Wells Fargo conventional minimum is 5% down.
I'm in the same situation as you except I'm purchasing solo. I put an offer in a condo and putting 5% down. I rather put my "rental money" to something I actually own.
Re: Under FHA you can close w 3.5% down and Wells Fargo conventional minimum is 5% down.
On a NYC condo?
@West34, yes on NYC condo. Chase bank also does it but I heard mixed rumors about it. I think if your mortgage broker is good they can get it for you. I just got a quote from chase bank for 5% downpayment conventional on a condo.
i don't mean to pry.But when you say 'partner' it implies not married (ie BF/GF, BF/Bf, GF/GF i don't really care), you don't want to buy a place together. Break-ups happen and the last thing you want is locked up capital and inability to sell b/c you can't get all signatures out of spite at closing/contract.
Snuffles,
It's call divorce, it is pretty prevalent in society.
Snuffles: are legally married couples who later seek divorce more prone to cooperate when they part ways as opposed to unmarried couples? If so, that's news to me.
Hi Everyone,
Thanks so much for your advice. I guess I should have clarified a few things:
- The $45K is what we have saved specifically towards a down payment, we have additional savings for closing costs and living expenses, etc.
- Our jobs are both stable and long-term, and I expect my salary to raise pretty steadily over the next few years
- We currently live with another couple (our best friends) and enjoy it very much, we would be continuing to live with them but getting paid rent from them
- We are not married, but have been together for 4 years and our relationship is more stable than most marriages I know (sadly). Only reason we are delaying marriage is because we want a nice wedding and are currently saving for other, more pressing goals: a home while we are still in a buyers market, and for graduate school for an MBA
Maybe this changes some opinions? We could wait and save more than 10% down, but I'm afraid to miss the opportunity to buy now. I guess the challenge is the co-op boards, so maybe a condo is the way to go?
Snuffles is right.
MovinOut123, first time buyers I know tend to underestimate or fail to account for:
1. Closing costs
2. Remodeling cost (even when it's in move-in condition, there seems to be always something to fix or change)
3. Appliances (large and small)
4. Furniture
5. The size of all the monthly and quarterly bills: Insurance, RE Taxes, Utilities, Maintenance
As a result, almost all of them end up getting loans from their parents or siblings. As far as I know, none of them have paid back all those loans. The siblings tend to get paid back first after 3 to 5 years, the parents will probably never see the money again.
Assuming you will have at least $20K in post-closing liquidity, you can afford a home up to $225K. I wouldn't even know where to begin looking for a 2 bedroom anywhere in the city at that price point.
And don't even consider a co-op if you're planning on running a boarding home.