Row Of Manhattan Brownstones

Your Guide To Buying A House In NYC

Molly Grace9 minute read
August 11, 2021

Like the city itself, New York City’s real estate market is unlike anything you’ll encounter elsewhere. It’s competitive, crowded and often quite expensive.

What does this mean for New Yorkers looking to own their own little slice of the so-called greatest city in the world? Here’s everything you need to know about buying a house in NYC.

 

Buying A Home In NYC: What You Need To Know

So, you want to buy a home in New York City. While the area has a ton to offer its residents, it can all make the home buying process overwhelming, even for longtime New Yorkers.

Let’s go over what this process typically looks like and look at some of the intricacies that are unique to buying a home in NYC.

Determining If You Should Rent Or Buy

New York City is notorious for its pricey real estate. Because of this, renting is incredibly popular in the city.

While the U.S. as a whole has a homeownership rate around 64%, according to U.S. Census data, New York City has a homeownership rate of just 33%. However, this rate varies quite a bit among the city’s five boroughs. The Bronx has the lowest homeownership rate of 20%, while Staten Island actually has a higher rate of homeownership than the national average: 69%.

If you’re considering buying a home in the city, you’ll first want to determine whether it makes financial sense for you to do so, or if you’d be better off renting.

While it’s true that buying a house in New York City can be expensive – for many, prohibitively so – the cost to rent in the city is also fairly high. For those who can afford the upfront costs of homeownership, buying a home in NYC can be a good investment. Consider the benefits of slowly building equity in a home with each monthly housing payment rather than paying rent to a landlord, where you get no return on investment.

A rent vs. buy calculator can help you better understand how much buying a home would cost you compared to renting and how long you’d need to stay in the home for it to be worthwhile.

Saving For A Down Payment

One of the biggest barriers to homeownership, regardless of where you live, is the down payment.

Though 20% down has always been the gold standard, most buyers put down less than that. Some loan programs even allow buyers to go as low as 3.5% or even 3%.

If you’re buying a house in New York City, however, you likely won’t get to take advantage of many of these low down payment programs. Many buildings require buyers to put down at least 20%. Condos may allow buyers to put down 10% or less, while many co-ops may require more than 20%.

With the city’s high prices, you’ll need a hefty sum of money to get into a home. For example, a 20% down payment on a median priced home in Brooklyn is a little over $150,000. You can tap into your own savings, supplement your down payment with gift funds from relatives or see if you qualify for any down payment assistance or grant programs.

In addition to a down payment, you’ll also need some cash set aside for closing costs. These are fees you’ll incur throughout the process of getting a loan and purchasing a property, and they typically amount to 3% – 6% of the home’s purchase price.

Choosing The Type Of Home You Want

You’ll have a few options for housing types in the city, depending on where you’re looking.

  • Co-ops: Housing cooperatives, or co-ops, are extremely common in New York City. When you buy into a co-op, you don’t actually own your unit; instead, you become a shareholder in the building.
  • Condos: Condos are also a popular housing option for New Yorkers, though slightly less common than co-ops. When you buy a condo, you own your unit, typically within a building of multiple units, and you share ownership of the building’s common areas with the other unit owners.
  • Townhouse: A townhouse is typically a multistory home that shares one or more walls with an adjacent home. Think row houses or NYC’s beloved brownstones.
  • Single-family detached: This type of dwelling exists as a single dwelling that shares no walls with other units or buildings. Though less common in the city, you can still find detached homes in certain areas.

Think about your needs and wants. Do you want more control over your space? Prefer a building that offers lots of amenities? Don’t want to be in charge of maintenance? This will help you figure out which type of home is best for you.

Securing Financing

Unless you plan to pay for your new home in cash, you’ll want to get preapproved for a mortgage before you begin house hunting. Getting preapproved will help you determine how much you can afford and shows sellers that you’re serious about buying a home.

To get a mortgage, you’ll typically need at least a 620 credit score. You can potentially go lower with some government loans, but be aware that these types of loans may limit where you can buy. If you’re planning to buy into a co-op, for example, you won’t be able to finance your purchase with a government-backed mortgage such as an FHA loan.

In addition to a decent credit score, you’ll also generally need a debt-to-income ratio (DTI) below 50%. Your DTI is the percentage of your gross monthly income that you spend on debt payments. If you have a high DTI, you might want to consider paying down some debt before applying for a loan.

Your lender will have you provide tax documents and paystubs to show that you have a steady source of income. They’ll also verify that you have the funds for a down payment in your bank account.

Enlisting The Help Of Professionals

A good real estate agent will guide you through the process and help you have an overall smoother experience as you purchase your new home. They’ll find homes for you to tour, help you negotiate an offer and deal with any speed bumps that appear along the way.

While a real estate agent is sufficient in most states, in New York, it’s customary for buyers to also have a lawyer representing them in the transaction. In the state of New York, only licensed attorneys can create a purchase contract, and you need to have an attorney present at closing. Your lawyer will also go over the details of the transaction, the property you’re buying and the building you’re buying into and warn you of any red flags.

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Choosing A Neighborhood

New York City is a big place, so you’ll want to narrow down your search to just a few different areas. When choosing where you’d like to live, consider your commute to work, the amenities you prefer in a neighborhood (restaurants, stores, parks, nearby subway stops, etc.), noise level, safety, and any other features you need to enjoy and feel good in your home.

Utilize Rocket Homes® Housing Market Reports for your prospective neighborhoods to better understand how the market is fairing in that particular area.

Acing Your Co-Op Interview

Thanks to the popularity of co-ops, another New York housing eccentricity is the co-op board interview.

If you plan to buy a co-op, you’ll need to be approved by the co-op’s board. This means sitting through an interview where they’ll ask you a lot of questions. They’ll be most concerned with ensuring that you’re financially stable enough to afford your unit long term, but they’ll also want to know if you have any noisy hobbies or other quirks that could make you a nuisance to your neighbors.

Make a good first impression and treat it like a job interview: dress well and prepare ahead of time. Your real estate agent can help you get ready for the questions they may ask. 

Buying A House In NYC For The First Time

If you’re a first-time home buyer, or it’s just your first time buying in New York City, working with a real estate agent whom you trust is vital. They’ll be your guide and help you understand the process and what you need to do to have a successful home buying experience.

Though homeownership can be financially beneficial in the long term and can even be a good investment in some cases, a lot of first-time homeowners are surprised by just how expensive owning a home can be. Before you begin the process, do your homework and make sure you fully understand the costs that come with buying a home and being a homeowner.

Consider your upfront costs, such as your down payment and closing costs, as well as all the ongoing expenses that come with homeownership, including maintenance and repair costs, HOA fees, insurance and property taxes.

How To Buy A House In NYC With Low Income

Due to high prices and large down payment requirements, homeownership is difficult or even impossible for many New Yorkers to attain.

However, the city does have some affordable housing stock and assistance programs available to those with lower incomes and less buying power. Here’s a quick rundown of how a few of these programs work.

HomeFirst Down Payment Assistance Program

First time home buyers living in New York City may be eligible for up to $40,000 in down payment assistance.

HomeFirst assistance comes in the form of a forgivable, 0% interest rate loan. To have your loan forgiven, meaning you don’t need to repay it, you’ll have to reside in the home as your primary residence for at least 10 years.

To qualify, your household can’t earn more than 80% of the area median income. As of 2021, one-person households can qualify with incomes up to $66,850, for example.

You can learn more about the specifics of the HomeFirst program on the NYC Department of Housing Preservation and Development’s (HDP) website.

Income-Restricted Housing

If your income prevents you from being able to afford a home in NYC, you might want to try looking at income-restricted housing.

HDP oversees a portion of the city’s affordable housing stock known as Housing Development Fund Corporation cooperatives (HDFC co-ops). These co-ops are income-restricted, meaning if you earn more than the income cap, you won’t be able to buy the HDFC co-op unit.

Typically, households can’t earn more than 165% of the area median income to qualify, but some buildings may have more stringent income requirements.

You can find available HDFC co-ops through your real estate agent or by searching online.

Affordable Housing Lotteries

The city also runs affordable housing lotteries for both renters and buyers who meet income thresholds.

You can sign up for current affordable housing on the NYC Housing Connect portal. Some HDFC co-ops are available as lotteries through this portal.

Top Three Boroughs For Real Estate in NYC For 2021

Which of New York City’s five boroughs is the best to buy a house in?

While Manhattan and Brooklyn get a lot of love, we’re going to focus on NYC’s other boroughs, all of which have healthy housing markets, a little more affordability, and plenty to offer in terms of culture, amenities and recreation.

Queens

Queens Row Houses

Queens is an incredibly diverse borough with some of the best food offerings in the city. Thanks to this and its wide range of living options – whether you’re looking for a hipster enclave, a more classic, bustling urban vibe or neighborhoods that feel practically suburban – Queens is a great place for buyers looking to put down roots in the city.

The median sale price for home in Queens is $660,021. Though prices have increased a bit compared to last year, this borough remains more affordable than Manhattan, which is NYC’s most expensive borough with a median list price of $858,000.

Queens is currently experiencing a buyer’s market, so it’s a good place to get a deal; 71% of homes were sold under asking last month.

Queens Real Estate Listings

Queens Trend Report

The Bronx

Bronx school bus

The Bronx, touted as the birthplace of hip-hop, is a diverse and culturally rich place to live. Though it has a reputation for being a rough area, there are a lot of safe and affordable neighborhoods for home buyers looking for a spot with lots of green spaces (including the famous New York Botanical Garden) and plenty to do (ever heard of the Bronx Zoo?).

The Bronx is, currently, a buyer’s market with a median sold price of $575,000. Homes sell relatively fast here, and 58% sold under asking last month.

Bronx Real Estate Listings

Bronx Trend Report

Staten Island

Staten Island View

If you prefer the space and peace of suburban living while still having access to all the amenities of city life, Staten Island is the place to be. It’s affordable, spacious and just a ferry ride away from Manhattan.

The Staten Island housing market is fairly balanced; it’s currently in neutral territory, though it was a buyer’s market as recently as last month. The median sale price is $570,000, and 77% of homes sold under asking in the last month.

Staten Island Real Estate Listings

Staten Island Trend Report

The Bottom Line: NYC Is A Great Place To Live, If You Can Afford It

Buying real estate in New York City can be a great investment, but it’s not something that everybody, or even most New Yorkers, can afford.

If you’re struggling to find affordable housing in NYC, it might be a good idea to try your luck with one of the city’s housing lotteries, or search for an HDFC co-op.

Ready to get started on your home buying journey? Consider working with one of Rocket Homes Verified Partner Agents – we’ll match you with a local expert who’s the perfect fit for you.

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Molly Grace

Molly Grace is a staff writer focusing on mortgages, personal finance and homeownership. She has a B.A. in journalism from Indiana University. You can follow her on Twitter @themollygrace.