Everything You Need to Know About Buying a House in New York

Location is everything when buying a house in New York. Prepare for high property taxes and make a large down payment.
Written by Lynell Spencer
Reviewed by Melanie Reiff
If you’re buying a house in
New York
, be prepared to make a 20% down payment and to pay higher than average property taxes. Depending on where in the state you choose to live, your home costs will vary dramatically. 
New York State has some of the most sought-after living spaces in the country, whether you’re looking to live upstate or near the city. Relocating to one of New York City’s five boroughs will cost you, but owning property there is a solid investment. 
Getting started on your first (or fifth!) home-buying process is a big deal. Fortunately, home and car insurance broker
is here to explain the ins and outs of buying a house in New York.
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Figure out your finances

There is a lot of preparation that goes into buying a home in the Empire State. Before you do anything else, carefully review your credit score, income, spending patterns, and savings to determine how much you can afford to spend on a house.  

Check your credit score

Your credit rating is perhaps the most important factor lenders will look at when reviewing a mortgage application. If you are even considering buying a home in the next few years, begin looking at your credit report now. 
Even if you already have good credit, try to get your score even higher. The higher your score, the lower interest rates you can enjoy.
You should have a minimum credit score of 620 to apply for a conventional, fixed-rate loan in the state of New York (640 if you are considering an adjustable loan). You can qualify for some government-backed loans with a score of 500 or better. 
If your credit needs work, here are some things you can do to raise your credit score: 
  • Review your credit report and look for fraudulent or incorrect accounts. Follow the reporting company’s instructions to dispute any transactions that you identify.
  • Pay off outstanding negative accounts. Contact debtors and make arrangements to resolve any balances. 
  • Ask debtors to remove accounts from your report once you have caught up or paid in full.
  • Lower your
    credit utilization score
    by paying down credit cards and loans without closing your accounts. To boost your score, keep your utilization rate under 30%. 

Calculate your debt-to-income (DTI) ratio

Most lenders in New York look for applicants with a debt-to-income ratio of 28/36. This means that lenders expect that 28% of your income is being used to pay housing costs, and 36% of your gross income (or less) is being used to pay all of your monthly debts.
To calculate your debt-to-income ratio, add up all your monthly expenses (rent, credit card payments, alimony, etc.) and divide the sum by your monthly income.  
You can keep your DTI low by paying off car loans, paying down credit cards, and holding off on financing any major purchases in the year leading up to your purchase. 

Determine your down payment 

For a conventional home loan in New York, be prepared to pay 20% of the total cost of the home outright as a down payment. This amount can fluctuate depending on where in New York you are looking for a house. 
For example, in New York City, the average price of a home is $779,000, which would require a down payment of $155,800. However, a home in Buffalo costs about $183,000, with the corresponding down payment landing at $36,600. 
If a 20% downpayment is out of reach, you may qualify for some alternative, government-backed loans that can help you obtain a house with a lower down payment:
  • FHA loan: A mortgage insured by the Federal Housing Administration for people with lower incomes, and first-time homebuyers. 
  • VA home loan: A mortgage insured by the Veterans Administration for service members, veterans, and eligible surviving spouses  
There are also some programs specifically for people looking to live in New York:
  • HomeFirst Down Payment Assistance Program offers up to $100,000 for qualified NYC buyers to put toward a down payment or closing costs. 
  • State of New York Mortgage Agency (
    ) offers multiple programs that include grants, down payment assistance, and low-interest mortgages.

Prepare for closing costs and other fees

Along with your down payment, you will need to plan to pay closing costs when you sign your mortgage agreement. Closing costs cover several fees associated with the buying process and can be shared between the buyer and the seller in some cases. 
In New York, buyer closing costs are about 1.5-5.0% of the total cost of the home. Closing costs often include:
  • Home appraisal 
  • Credit report fee
  • Home inspection (often required for the
    Seller’s Disclosure
  • Mortgage origination fee
  • Mortgage insurance
  • Property taxes first-year premium
  • Homeowners insurance first-year premium
The state of New York has higher property taxes than 80% of the nation. On average, property taxes fall between 1.69-1.72%. Property taxes are set by the local government and will vary by county. For instance, the property taxes in New York City are lower than the rest of the state, at 0.88%.
Key Takeaway Compare the property tax rate in several counties and factor that into your budget. 

Look for homeowners insurance

You will need to find home insurance with adequate coverage before you can sign your loan agreement. 
Most policies cover the structure of the home from damages caused by fire and other perils. Still, every homeowner has different needs, and houses in NY may require additional coverage based on location. 
If you’d rather leave the hard work of gathering quotes to someone else, use
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Key Takeaway Understanding your financial situation and the cost of housing in various parts of New York are critical first steps to homeownership in the Empire State. 

Get preapproved for a mortgage

The next step in your process is to get preapproved for a mortgage. 
Don’t confuse preapproval with prequalification. Prequalification does not require a credit check and is just an estimate of how much the lender thinks you may qualify for. A preapproval considers your credit and other factors, and while it is not finalized, it demonstrates that the lender is willing to back your home purchase. 
In most cases, you will need preapproval before an agent will begin looking for a home with you. A good bet is to start with your current bank and see what they have to offer, but don’t just apply for the first loan you find. 
Taking the time to see who could offer a lower interest rate can save you thousands of dollars over the lifetime of your mortgage. 
If you are hoping to take advantage of government loan programs like FHA or VA, make sure that the lender you choose works with the program you want. 

How to pick the right mortgage terms 

Once you find a lender, consider the mortgage options that are available to you. You will need to choose the term of your loan—most mortgages are paid back over a 15-year or 30-year term
Choosing a shorter-term loan means that you will have bigger payments, but your home will be paid off sooner, and you will save money on interest. Your loan interest rate will be determined by factors like the length of your loan and your credit score. 

Look for a house

Looking for a house is arguably the most enjoyable part of the process. There are still a few steps involved, but this is where you start to see your dream become a reality. 
To choose the right house in New York, you will want to start by narrowing down the county, city, and neighborhood that suits your needs. 

Pick your city or neighborhood 

In New York, the city or neighborhood that you choose will determine how much you spend and what type of housing is available. Upstate New York will generally give you more house for your money. Albany and Kingston are some of the most affordable places to live in New York state. 
If you are looking for a place in New York City, it may be easier to find apartments, condos, or townhomes than a single-family home. Mortgage prices vary across NYC’s five boroughs, with Manhattan being the most expensive and the Bronx the most affordable. 

Buyer’s market vs. seller’s market

The real estate market goes through cycles of favoring the buyer and then the seller. If you are thinking about buying but aren’t in a time crunch, try to obtain a house in a buyer's market
In a buyer’s market, the supply of homes outweighs the demand. This gives you, the buyer, some leverage in negotiating the price and closing costs of the home. Lenders may offer more incentives like lower interest or fewer fees during these market conditions. 
An increase in demand for homes creates a seller’s market, where demand exceeds the number of homes on the market, shifting the power to the seller. This often leads to more selective lending, bidding wars, and higher down payments to obtain a home.

Find a real estate agent

Once you’ve decided on a location and know the features of the home you are looking for, find a real estate agent that knows the local area well. 
In addition to showing you properties, your agent will be assisting you with placing your offer, drawing up contracts, and providing documentation.
Take the time to look at customer reviews, the agent’s portfolio, and ask a few questions to ensure this agent is the right person to represent you.

Make an offer

Life moves quickly in New York—real estate is no exception. Be prepared to make an offer right away when you’ve found your house. Making an official offer requires some documentation that your agent will help you assemble. In New York, this includes:
  1. Mortgage preapproval letter from your lender
  2. Down payment and closing costs
Remember that your agent is your advocate. They should be representing your interests, not the seller’s, during this process.

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If you want to buy a home in New York, you’ll need an income of around $73,000. For homes in the city, you’ll need about $100,000 per year to keep up with your mortgage payments.
For personal property, consider your life plans for the next several years. Is NYC the place you want to stay? If you plan to start a family, can you afford to buy a place that will meet your changing needs?
NYC is generally a safe bet if you’re buying an investment property. The real estate market and demand for homes tend to be reliable, but there are never guarantees that you’ll turn a profit.
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