Down payment assistance
September 15, 2014 3:12 PM   Subscribe

I am saving up for the down payment on a co-op apartment here in NYC. I'll estimate the sum of said payment to be in the $30-$50K range, based on current co-op prices and a down payment requirement of 20%.

As a first-time homebuyer, are there any programs out there to help me with the down payment? Are there any other first-time homebuyer resources I should be aware of? Or, for that matter, sources of advice and information for NYC co-op buyers? I have no experience at all in this field so any advice you could provide would be greatly appreciated.

As for the finances -- good salary, not six figures but pretty damned good, excellent credit, great job security.

Many thanks in advance.
posted by the hot hot side of randy to Work & Money (17 answers total) 9 users marked this as a favorite
 
If you're buying a co-op in NYC, you'll need to have LOTS of money in the bank.

I'm not an expert but my friends who have owned in NYC have experienced all sorts of issues with co-ops. Co-ops are picky, and can require pretty much anything they like.

Most co-ops require buyers to put down 20-25% of the purchase price, about the same as what most lenders require these days. But the range can be vast, depending on the co-op—anywhere from 10% down (very rare) to 50% or more at higher-end buildings.

Co-ops also expect you to have sufficient money left over (also known as ‘liquid asset requirements’). The required amount can range drastically, from a few months worth of maintenance payments to 1 to 3 times the purchase price of the apartment. Two years worth of mortgage and maintenance charges is about average.

In addition, each co-op will expect you to meet a debt-to-income ratio, usually around 25%-29%. That means your total monthly payments--mortgage and maintenance--cannot exceed the specified percentage of your gross income. An excellent credit score is also required.

Add them all up, and you will find that the average co-op's financial standards are much higher than the average mortgage bank...a primary reason NYC co-ops withstood the recent recession so well.



Here's a good article about it.

Basically if you can't come up with at least 20% for a down-payment, it's likely a co-op is out of your reach.

But do you reasearch. I know BofA has special mortgages for Teachers, perhaps there's a program for your profesison.
posted by Ruthless Bunny at 3:26 PM on September 15, 2014 [1 favorite]


Do you have a real estate agent? Oftentimes they know about these programs. I know Massachusetts has a down-payment assistance program for first time home buyers (which I wish I knew about when I bought my first home there). I don't know about NYC or NYS.
posted by tckma at 3:26 PM on September 15, 2014 [1 favorite]


Or, for that matter, sources of advice and information for NYC co-op buyers?

Our lawyer was incredibly knowledgeable about the ins and outs of the process, so I would above everything else suggest getting some lawyer recommendations from friends/coworkers/etc. that recently went through this. Seriously, there's just so much outdated, shitty and just outright incorrect information everywhere that even if you can sort the 5% of useful stuff from the 95% of crap, you still need someone who knows their shit to run the 5% by.
posted by griphus at 3:37 PM on September 15, 2014 [2 favorites]


Co-ops in NYC vary widely in NYC. $50,000 @ 20% implies a purchase price of $250,000 so I assume that you're looking at apartments in one of the boroughs that is not Manhattan. The co-ops with the most onerous requirements are often (but not always!) the ones in Manhattan.

I'd disregard the first comment to this question and heed the second and third comment. Find a good lawyer and good agent.
posted by dfriedman at 4:05 PM on September 15, 2014 [2 favorites]


I read a lot of real estate books when I was younger. There is more than one way to skin the real estate cat. If you expect it to take a while to save that much, then you likely have time to do some homework. I suggest you start reading up.

A) Sometimes employers have programs that can help with down payment or closing costs and that's something to check into:
I bought a house at age 27 with no down payment (and no savings). My husband was career military, so we didn't need a down payment because of a military program.

B) Learn a thing or two about negotiating and market conditions:
Real estate is kind of more like old fashioned stories you hear about dickering in an open air market place. It is a different animal from walking into a department store and paying the price listed on the tag. I had zero savings. I counteroffered with "seller pays closing costs" because I had no means to cover them. It was a FIXER and it was a motivated seller. They tacked the closing costs on to the price of the house, which bumped it up slightly, but they covered it. My awesome real estate agent also suggested we get them to pay for new exterior paint and me and hubby supply the labor. A new paint job did wonders for the place and it was a thing I would not have thought of. (So: second vote here for getting a good lawyer and/or real estate agent.)

C) Learn what kinds of loans and other financial instruments are available:
I have known people who put 5% down and got a second loan that covered the other 15% down plus some kind of insurance. This is a civilian thing and I have no first-hand knowledge of it.

D) Google "first time homebuyer programs":
Some places do have educational programs, down payment assistance and similar for first time homebuyers.

A home is a big investment. I suggest you start reading about real estate, real estate financing, etc. A single Ask is not going to adequately prepare you for this if you really want to get into a house for less. In real estate, knowledge is power. Otherwise, it can cost you through the nose.
posted by Michele in California at 4:06 PM on September 15, 2014


A home is a big investment. I suggest you start reading about real estate, real estate financing, etc.

Make sure the stuff you read is NYC-specific. General real estate advice is worse than useless here. The market is insane, co-ops are bought as shares not property/land, and generally prices don't go down, which makes a huge difference.
posted by griphus at 4:12 PM on September 15, 2014 [9 favorites]


In addition to New York specific, make sure it is not out of date. You can go to the library and check out all kinds of books on buying a house no-money-down but if they are from 30 years ago, they are very likely to be talking about tricks that are going or have already gone the way of the dinosaur. That, again, can be worse than useless. (I don't recall the specific instrument that was a good way to do this when I was a teen but I do know that in my lifetime that trick became a largely or entirely obsolete mechanism.)
posted by Michele in California at 4:23 PM on September 15, 2014


I disagree with anyone who says you need to have 20% down to buy a home. FHA is a legitimate financing program/type of loan that allows you to put as little as 3.5% down. My wife and I did this on a house we bought a few years ago because I wanted to keep more cash in the bank. Now, of course if the market is competitive then putting a low down payment might make you lose the sale to someone who has a larger down payment. Definitely talk to your real estate agent and talk your your lender or mortgage broker.
posted by ljs30 at 5:09 PM on September 15, 2014 [2 favorites]


The down payment amount, if you manage to get an FHA loan, doesn't matter to the seller as the bank that gives you a mortgage pays them the rest of the agreed-upon price. Just make sure that you are pre-approved before you start searching.
posted by mareli at 6:01 PM on September 15, 2014


And a quick google for first-time home buyer programs in NYC yielded this city program, as well as others.
posted by mareli at 6:05 PM on September 15, 2014 [2 favorites]


OP is asking about a coop in NYC - many (if not most) healthy buildings in any borough will not want a buyer putting down less than 20%. FHA or not doesn't matter - if the board says 20% is the minimum, that's the minimum. For NY there's the SONYMA program - I can't remember the details, but look into it - a good agent would know about them.
posted by Calloused_Foot at 8:17 PM on September 15, 2014 [7 favorites]


Calloused_Foot is totally right. I bought a NYC co-op apartment a couple years back and the board would not have been happy with less than 20%. For what it's worth, even if my board had let me, I wouldn't've wanted to put less down--the mortgage + monthly maintenance payments would've been difficult for me to pay if they were any higher.

If you think there are any questions I could help with, feel free to memail me; I was a first time homebuyer (if you can even call it that, maybe a first time co-op stock share acquirer) not too far back so I remember what it's like!
posted by ferret branca at 6:00 AM on September 16, 2014 [1 favorite]


We've just been through this on a slightly higher budget than you!

Lots of good advice above. If ANYONE gives you advice who hasn't bought a co-op in the last 5-10 years in NYC, you should ignore. This is a crazy market with its own rules.

FHA=Fail for 99% co-ops, even in outer boroughs. Loans for downpayment*=fail. COOPS are different. THEY can set downpayment/liquidity requirements; they often want stable jobs if you aren't very liquid. AFTER getting an accepted offer and signed contract from seller (1 weeks-2 months), AFTER getting a mortgage funded (not just approved - 1 weeks to 2 months), you then Apply To The Board of the Co-oP.
You give the co-op a 30-150 page packet with you & your partner's entire life history in it; including all of the mortgage and loan details on NYC-approved forms, bank statements of all assets, as well as 1-7 personal and business reference letters, letters from employers, employment history etc. Any deviation from expectation and they will often just reject your application and you will have wasted months getting an accepted offer for sellers, applying for mortgages (with $$), having your layer start work ($$) etc. Even if you manage to get stuff past them on first reading you have the co-op interview to deal with, and if you are shakey, they can reject!

This is why it is CRITICAL to have a good realtor working for you who has specific knowledge about that market and ideally that neighborhood and the co-op's foibles. You want not to waste your time applying for things you won't reach.


*Note if you or your partner has a 401k/403b you can often "borrow" tax free against how ever much you saved in it - up to 30-50% for primary residence costs. Coops don't think of this as a loan as you are borrowing against yourself, and the 401k/03b uses another 30-50% of your savings as collateral.

Note credit unions often have better loan programs, but YMMV.

*IF* You can tell us the neighborhood, I can give more advice, and maybe memail you broker/realtor reccs.
posted by lalochezia at 6:03 AM on September 16, 2014 [1 favorite]


Here is a good guide, a little manhattan-centric, but the process outline is right.
posted by lalochezia at 6:04 AM on September 16, 2014 [1 favorite]


Just Nthing that a 20% deposit at the time of contract signing (which usually is a few weeks from the accepted offer) is a standard requirement by a coop. I've never seen less, and the one we just bought required 30%. The rest of the financing is secured for the closing, which is usually a month+ away, but if you make an offer, it is implied you have the deposit available for escrow.
posted by griphus at 6:54 AM on September 16, 2014


lalochezia: "Lots of good advice above. If ANYONE gives you advice who hasn't bought a co-op in the last 5-10 years in NYC, you should ignore. This is a crazy market with its own rules."

Agreed, there's a lot of misinformed advice in this thread. My wife and I bought a coop in Brooklyn in '08, and I've sat on the Board of my building through several purchases.

lalochezia: "Any deviation from expectation and they will often just reject your application and you will have wasted months getting an accepted offer for sellers, applying for mortgages (with $$), having your layer start work ($$) etc. Even if you manage to get stuff past them on first reading you have the co-op interview to deal with, and if you are shakey, they can reject!"

I know there are some berzerk Boards out there, but by and large the Board wants to let the deal go through as long as the basic financials are sound. You just want to be careful about detailing any financial obligations you have, and be able to explain anything out of the ordinary.

Ruthless Bunny: "Co-ops also expect you to have sufficient money left over (also known as ‘liquid asset requirements’). The required amount can range drastically, from a few months worth of maintenance payments to 1 to 3 times the purchase price of the apartment. Two years worth of mortgage and maintenance charges is about average."

I think 2 years is pretty well on the high end, but you should have at least a year's worth, as well as be able to demonstrate being able to carry your mortgage based on your income with plenty of padding.
posted by mkultra at 2:20 PM on September 16, 2014


1. There is no real benefit by not having a buyer agent. I thought going without one might make our offer look up to 3% better if the seller agent didn't have to split the commission. But the seller won't care if the seller's agent has to split the 6% fee or not. Not that you need an agent, but if you were going to avoid one for this reason like some blogs from 2008-2012 advise, that's outdated if it was ever applicable for NYC. The agents that did email me would just send me listings I had already seen on the MLS sites, so I found them unhelpful in terms of looking for places. In terms of crafting an offer, I wish we had someone to work with. See my third point below.

2. You will probably lose out to all-cash buyers. Be ready for disappointment and thinking the whole game is rigged. It is. It took me a while to digest what was happening, but what I think is happening is they offer all cash (from family?) and then get a mortgage anyway. It's like a unfair advantage to have access to that cash and then not even use it. The cash acts mostly as a sign of commitment in the event that a mortgage is impossible that they won't back out. Also, all-cash offers are insurance against a low appraisal -which is highly likely in a hot market when offerings are 20%+ higher than nearby comps. For instance, if you offer 20% down on $250,000K, and the appraisal is only $225,000, and the bank finances 80% at $180,000, now you have to pay $70,000... $20,000 more in cash than your planned $50,000. Cash offers avoid this. One lender I spoke with said they had to delay the appraiser as long as possible so that recent closings would be listed and the appraiser could use them as comps.

3. Be ready for the Best and Final process, as all the apartments we saw were done this way. You essentially get 1 and only 1 shot at putting your offer in. Blind and Dumb. That's how the seller wants you, so you overpay in fear thinking about the competing offers without actually seeing the competition. None of this bid war nonsense. This is where an agent would help you. It sucks. And this is probably 2 days after you went to the only open house for 15 minutes and offers are due Thursday, and it's the biggest purchase of your life by a scale of like 250x, and you finally talk yourself up to making this commitment, and it will be the most expensive 1 BR in the history of the neighborhood up to now, and you put your offer in, oh god what are you doing, and then you wait, and then you email the seller's agent a week later, and they say, "Oh, the seller accepted a different offer last week," and you are like, "Y U NO TELL ME?" And then you start googling real estate in sunny Minneapolis, wondering how cold can their winters really be?

Welcome to apartment hunting in New York.
posted by yeti at 2:57 PM on September 16, 2014 [3 favorites]


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