Getting Preapproval for a Mortgage Before You Start Looking
Whether you’re a first-time buyer or not, securing preapproval for a mortgage is an essential step when looking for a home. This formal process involves a mortgage broker reviewing your financial information to determine if you qualify for a specific loan amount. Sellers tend to favor pre approved buyers because it demonstrates financial readiness, which can give you an edge in competitive markets. Compared to prequalification, which is less detailed, pre-approval carries more weight.
Buyers who are preapproved are typically seen as more dependable and less of a risk compared to those who are not. Additionally, pre-approval is beneficial for buyers because it provides a clear understanding of their purchasing power, making it easier to narrow down the home search to properties within budget.
Photograph courtesy of Caroline Newcomb
What is a Typical Down Payment in NYC?
When purchasing a home in New York City, buyers typically make a 20% down payment, with the remaining 80% covered through financing—a standard practice nationwide. However, co-ops often enforce stricter financing restrictions, depending on the building. In contrast, some new development condos allow for 90% financing, making them a more attractive option for first-time buyers.
Economic fluctuations have led many co-op boards to tighten their financing policies, requiring buyers to invest more of their own funds. For instance, some buildings that previously permitted 80% financing have now reduced that threshold to 70%.
While condos generally come with a higher price tag, they sometimes allow down payments as low as 10%. Additionally, banks have adjusted their lending criteria—although 20% down payments remain the norm, some institutions now require more. However, certain lenders still offer 90% financing, particularly for homes priced at $3.5 million or below.
Regardless of financing restrictions, a larger down payment can be advantageous. Buyers who either pay all cash or borrow 50% or less often have greater negotiating power, especially when dealing with motivated sellers.
What Happens After Your Offer Is Accepted?
After your offer is submitted and accepted, it might feel like you’ve crossed the finish line as a first-time homebuyer—but there’s still more to do. The next crucial step is signing the contract, which also requires a deposit.
Once both parties agree on the final contract terms, the buyer signs and submits it along with a contract deposit, often referred to as earnest money. This deposit serves as a show of good faith and is applied toward the total cost of the home.
Photograph courtesy of Caroline Newcomb
What Happens Between Signing and Closing?
Once the contract is signed and the funds are confirmed, the final steps toward closing begin. For co-ops and some condos, buyers need to submit a board package, which typically includes financial statements, proof of employment, and tax records. Meanwhile, the mortgage lender works on processing the required documents.
The period between an accepted offer and closing usually ranges from 30 to 45 days, though it’s wise to allow for up to two months to accommodate any unforeseen delays.
During this time, much of the process involves waiting—for board approval, inspections, appraisals, and mortgage finalization. The timeline can vary depending on factors like the type of property and the buyer’s financing arrangements.
It’s also essential for buyers to keep their finances steady throughout this phase. Making large purchases or taking on new debt could impact mortgage approval. To avoid any issues, buyers should continue paying their bills on time and avoid opening new credit accounts.
Understanding Closing Costs When Buying a Home
When purchasing a property, it’s essential to factor in closing costs on top of the purchase price. These fees are paid at the time of closing and generally range between 3-6% of the property’s price, with condos typically having higher closing costs than co-ops.
Closing costs can include expenses such as real estate attorney fees, bank attorney fees, mortgage origination charges, property appraisals, tax escrow, mortgage recording tax, recording fees, and title insurance. Co-ops may also require a flip tax, which can be a substantial additional cost. Meanwhile, new development condos often have extra charges, such as a transfer tax.
For properties priced at $1 million or more, buyers must also pay a mansion tax, which can range from 1-4% of the purchase price. And if renovations are in your plans, be sure to set aside additional funds for those expenses as well.
What to Expect at Closing
Closing on a home means handling a significant amount of paperwork and finalizing financial transactions. Both the buyer’s and seller’s attorneys oversee the process to ensure everything is completed smoothly.
While it may take some time, this is the final hurdle before officially owning your new home. And best of all, you’ll soon be a homeowner in New York City!
Photograph courtesy of Caroline Newcomb
If you'd like more information about townhouses or any other type of New York City property, please e-mail us at [email protected].
