The median home price in New York is roughly $783K, an increase of over 6% from the previous year and a slower growth rate than the national median. The state's average home value is significantly higher than the national average of almost $358K.
Budget is important, but there are other factors to consider when purchasing a home, such as the lender terms. When you’ve studied and know what to expect in the housing market, it can be simpler to find a property, complete the application and avoid taking on a lot of debt. MoneyGeek focuses on the fundamentals of homeownership for the typical homeowner, including how much it costs to buy a house in New York.
The typical cost of a house in New York is $783K, which is considerably more expensive than the national average of almost $358K.
Despite the availability of low- and no-down-payment mortgage options in New York, the usual down payment needed for a mortgage is 20%.
Before submitting an offer and finalizing the deal on a home purchase, you must choose a home in a suitable location, find the best rates, get pre-approval and do a home inspection.
Choose an Ideal Location
Among the many considerations when making a home purchase, location ranks high. Your monthly mortgage payment and the cost of the home itself will vary greatly depending on the location you choose. For instance, based on 2022 data, the median home price in Brownsville is about $566K, compared to an average of almost $2 million in Prospect Lefferts Gardens.
There are many ways to evaluate the quality of a neighborhood and determine the best place to buy a house in New York, including culture, the cost of living, closeness to essential services, entertainment and recreational opportunities.
Searching for a home may seem daunting. Speak with a realtor if you need assistance with New York property purchases. They could save you time and energy in the homebuying process.
Don’t discount your friends and family. If they have experience in homebuying, they might be able to advise you on your journey. Once you have a narrow list of suitable candidates, ask for recommendations from existing customers. An excellent real estate agent:
- Has a license and considerable industry experience
- Understands the local real estate market
- Has a good reputation for being trustworthy
- Communicates concisely
However, your specific requirements and preferences should precede all other considerations when selecting a good agent.
The cost of living varies significantly throughout the state of New York. For instance, you will spend 88% more of your income on necessities in New York City than in Albany.
When determining the best place to buy a house in New York, it's essential to factor in some of the following costs:
- Education and healthcare
- Utilities (electricity, water, etc.)
- Insurance rates
- Property taxes
Using MoneyGeek's cost-of-living calculator, you can get an idea of how much money you'll need to sustain in New York's major cities, which can help you determine the cheapest places to buy a house in New York.
With a cost of living index of 135.7 compared to the national average of 100, New York is one of the most expensive states to purchase a home. Those looking to buy a home in New York on a tight budget may consider relocating to a less expensive part of the city. While living expenses are lower in the suburbs, access to facilities like hospitals, schools and public transportation can be more challenging. Contrarily, city life is more expensive but has many advantages, such as convenient access to amenities, recreational opportunities and public services.
Compared to most major cities in New York, MoneyGeek found that purchasing a home in Rochester was the least expensive option.
Calculate Mortgage Rates
Investigating New York's current mortgage rates before beginning your search for a home there can be a good idea. With different mortgage options available, each with its own set of rates, the one most suitable for you will depend on your circumstances and requirements.
Income, credit history, credit score and debt-to-income (DTI) ratio can be significant drivers of loan amount and interest rate eligibility. You can only determine the best deal by comparing rates and offers from several lenders.
Consider that your interest rate will be affected by the mortgage plan you choose. A VA loan offers a lower interest rate than a conventional loan for veterans who meet the criteria.
Here are the average interest rates for each loan type:
- Conventional home loans: 5.8–6.6%
- VA loans: 4.8–6%
- USDA loans: 1.0% for modified payment assistance and 3.5% for low-to-very-low-income borrowers
- FHA loans: 4.8–5.9%
The average interest rates in New York can vary depending on the housing market.
The lender and other individual characteristics, like your income, DTI, credit score and history, will all affect how much you pay in interest.
While researching your alternatives and contrasting them, remember that the average annual percentage rate (APR), which can be different for each lender and location, must be given a lot of importance.
The mortgage payment is a recurring expense, so make sure you have enough money each month to cover it. Choosing between a conventional mortgage and a government-backed mortgage can be done most effectively by comparing interest rates.
A mortgage calculator, such as the one provided by MoneyGeek can make estimating your monthly payments easy. This calculator will divide your payment into its constituent parts, such as principle, interest, taxes and so on. It's also the best way to compare FHA and conventional loans to find which suits your requirements.
Once you have a quote in hand, you can shop around and compare down payment requirements, APR, available loan size and other terms from different lenders. Investigate your loan options if you are a first-time buyer needing financial assistance.
Applicants must meet each lender's unique set of loan approval requirements. It is advisable to explore and discover each lender's qualifying requirements. Mortgage lenders often consider the following factors in evaluating each mortgage application:
- Creditworthiness: Applicants with good to excellent credit ratings are preferred by lenders, though this criterion is not required for all loan types.
- Gross income: Your mortgage repayment ability often depends on your income.
- Debt-to-income (DTI) ratio: DTI measures how much of your monthly gross income is being used to make debt payments.
- Down payment: A down payment shows the lender that you are not a high-risk borrower, which may help you get a better interest rate.
Keep in mind that if your application is rejected, you'll need to strengthen its weaker points.
Prepare Down Payment Requirements
Making a down payment when purchasing a home is standard practice. The type of mortgage you have affects your annual percentage rate (APR), as some mortgages have low or no down payments, which can significantly affect your APR.
The required down payment amount is determined by the type of mortgage you're eligible for. A 20% down payment is typically required from conventional loan applicants. A 3.5% minimum down payment is required for FHA loans. On the other hand, those who are eligible for USDA and VA loans might not need a down payment. Keep in mind that USDA home loan applicants must be buying homes in eligible rural areas to qualify.
Now that you know what kinds of loans you qualify for, it's time to start planning for a down payment. Your down payment will significantly impact your monthly payments. A greater down payment typically results in lower monthly payments. To get a sense of how much money you should put away every month, have a ballpark figure of how much you’re planning to put down initially.
Private mortgage insurance (PMI), a policy that safeguards lenders in the event of a borrower's payment default, is another element that prospective homeowners should consider. Most conventional home loan lenders require buyers who put down less than 20% to purchase PMI. Not all mortgage options have this stipulation.
- Conventional loans: PMI is required if the down payment is less than 20%. Rates vary depending on credit score and down payment amount.
- FHA loans: PMI is not required, but you will likely need to pay an upfront mortgage insurance premium (MIP) instead.
- VA loans: No PMI required (supported by the Department of Veterans Affairs).
- USDA loans: No PMI required (may need to pay a guarantee fee).
Some borrowers might be eligible to have this insurance dropped from their mortgage after a few years of making on-time payments.
Some potential buyers may not have the financial resources to put down the standard 20%. Fortunately, there are a few options in New York.
- HomeFirst Down Payment Assistance Program: This program provides up to $100,000 towards the down payment/closing costs for first-time homeowners who have completed a homebuyer education program. The program has other eligibility requirements, such as passing a Housing Quality Standards (HQS) inspection and meeting the program’s minimum income requirements. This program is limited to those buying a condominium, a one-to-four-unit family home or a cooperative in one of New York City’s five boroughs.
If the above program doesn’t match what you’re looking for, there are other options for homebuying assistance. First-time homebuyer programs in New York may assist those who have never owned a home.
Get Pre-Approved for a Mortgage
After selecting a lender, the next and most crucial step is getting pre-approved for a mortgage. After pre-approval, you may discuss your requirements with the lender and learn more about their terms and conditions.
Pre-qualification is not pre-approval. When you pre-qualify with a lender, they will give you a ballpark figure for your loan. In contrast to a pre-approval, which requires a hard credit check that can lower your credit score, a pre-qualification does not.
New York mortgage applicants are often required to provide the following details:
- Driver's license
- Social Security card
- Current pay stubs
- Three years of tax returns with W-2s
- Bank account statements
- List of credit cards and debts
Learn from your lender what other documentation might be required depending on your status. Further documents, such as a profit-and-loss statement, may be requested from those who are self-employed.
Getting pre-approved for a mortgage is a crucial step in buying a home. The time it takes to get pre-approved for a loan varies from one lender to the next, but it could be up to ten days. You can see your maximum loan amount on the pre-approval letter. You should only apply for a pre-approval letter if you are prepared to close the loan within 30 to 90 days.
Please be aware that the pre-approval letter will lose all validity after the specified time period. If the letter is no longer valid, you will need to re-apply.
As stated in a pre-approval letter, a lender's willingness to lend you money is evidence that you are a serious buyer who can afford a mortgage. There is no limit on the number of pre-approval letters you can request, but the rigorous credit checks performed by lending institutions may affect your credit score.
The following information is typically included in a letter of pre-approval:
- Maximum loan amount
- Loan type
- Loan term
- Mortgage monthly payment
- Annual percentage rate
Nonetheless, the particulars of a lender's pre-approval letter are entirely up to the lender. There is a good chance that the lender will be satisfied with the information you provided, but it always helps to be thorough. If you acquire a pre-approval letter and use it while it's still good (often within 30 to 90 days), you'll boost your profile and strengthen your position when negotiating with lenders.
Conduct a Home Inspection
Before purchasing a house, a thorough inspection of the area is required. A professional home inspector can shed further light on the state of the house and the urgency of any needed repairs. The buyer is traditionally responsible for paying for the home inspection. A home inspection's findings may give the buyer more leverage to negotiate if the house needs work.
Choosing a qualified professional for a house inspection in New York is crucial. If you hire a professional inspector, they will provide you with a detailed report to help you decide whether or not to buy the property.
The following elements should be on your house inspection checklist to rule out major structural issues, safety dangers and other damages:
- Windows and doors
- Surrounding grounds
- Attic and basement
- Exteriors and interiors
- Heating and cooling systems
- Plumbing system
- Electrical system
- Major appliances
Additionally, there are house inspections conducted by experts who look for things like pest damage, decay in the foundation and damage by mold and sewage.
Typically, a house inspection is not necessary before closing a home purchase in New York. However, it may be required in specific cities and counties inside the state. In addition, you may need to do further inspections on the home that you want to purchase.
As a result, you must discuss the inspection parameters in depth with your home inspector. Then, you'll be able to determine how much money you should set aside. Besides the fee paid to a professional, additional costs can be based on the components and systems you choose to inspect.
One must always get a home appraised before purchasing in New York. The appraiser will determine the property's current worth. The appraiser's observations of the home's attributes and the prevailing market trend both have a role in determining its value. The appraiser will also base their estimates on the going rates for other homes in the area.
The next step is for the appraiser to provide the buyer with a written report detailing their findings from the inspection. This way, the mortgage lender will have a better idea of whether or not the applicant is taking on too much debt. Lenders use appraisals to reduce the chance that a borrower won't be able to pay back a loan because of taking on more debt than the home's value could support.
Close Your Mortgage Loan
Once the loan conditions have been carefully reviewed, the mortgage closing procedure can start. It's critical to remember that closing costs are a part of the homebuying process. Closing costs include fees for obtaining credit reports, lender appraisals and document preparation. Additional fees could also apply to third-party services like home inspection, legal services and more.
Preparing closing documentation takes time. Below are some of the documents you can expect to review. MoneyGeek advises reading all documents carefully before signing them:
- Final loan application: Original loan applications must be signed to attest to the validity of the information provided. At this step, you must inform the lender of any changes to your financial condition.
- Mortgage note: This legally binds you to pay the mortgage and includes the mortgage amount, interest, payment dates and terms.
- Homeowners insurance policy: A homeowner's insurance policy will protect you financially against damage to your home and its contents.
- Title insurance policy and survey: This ensures that the property is free of encumbrances and can be owned legally.
- Property deed: This document details the property and transfers ownership to the buyer.
- Closing disclosure: This contains your loan terms. The law requires you to receive the closing disclosure three working days before the mortgage closing.
Take note of the fine print. Neglecting little but important components could cost you later. While reading the fine print, look up foreign terms online, consult an expert or ask your lender.
Loan closing costs range from 2% to 5% of the purchase price, depending on the lender, your location and other factors. Mortgage closing costs typically include:
- Origination fee: Some lenders charge origination fees, usually a small percentage of the loan amount.
- Escrow: Taxes, insurance, mortgage insurance and the annual funding fee fall under this category.
- Title search fees: You must pay for a title search to lawfully transfer the property to you.
- Lender fees: The lender will charge you fees such as an appraisal fee and a fee to access your credit report, which you must pay.
- Third-party fees: As a buyer, you are responsible for additional third-party costs, including inspection, legal and homeowner association transfer fees.
- Home inspection charges: You will pay for employing a qualified home inspector to evaluate the property’s condition.
- Homeowners insurance: This insurance protects homeowners from property damage and liability from property accidents.
After choosing a house, calculating mortgage rates and gathering the necessary documents, you can finish the homebuying process. You also need a pre-approval letter and a home inspection to seal the sale.
These steps will make you a legal homeowner in New York. Next, manage your mortgage payments and finances. Budgeting for cleaning, repairs, and mechanical and electrical system upkeep and saving for a rainy day are some of the many homeowner obligations. If you want to reduce your monthly payments, consider making a higher down payment.
New York Homebuying Details
Smart homebuyers in New York should research the neighborhood, compare mortgage rates from various providers and shop around for the best rates. These are the typical steps for purchasing a home. Talking to a lender or an agent is the simplest approach to learning about buying a home in the state.
Meanwhile, looking into various homebuyers assistance programs could help New York residents ease the homebuying process.
The New York State Homeowner Assistance Fund (NYS HAF)
This program is state-run. It receives funding from the federal government to aid homeowners experiencing financial difficulties due to the COVID-19 pandemic who are at risk of default or foreclosure.
Frequently Asked Questions About Buying a Home in New York
Buying a property in New York is a huge undertaking. MoneyGeek has compiled answers to the most frequently asked questions to help you navigate the process.
- Forbes. "10 Most Affordable Cities to Buy a Home." Accessed November 30, 2022.
- Homes and Community Renewal. "New York State Homeowner Assistance Fund." Accessed October 24, 2022.
- LivingCost.org. "Cost of Living in New York State." Accessed October 22, 2022.
- Missouri Economic Research and Information Center. "Cost of Living Data Series." Accessed October 22, 2022.
- New York Mortgage Coalition. "Down Payment Assistance and Closing Cost Assistance in NYS." Accessed October 22, 2022.
- Tax.rates.org. "New York Property Taxes 2022." Accessed October 22, 2022.
- U.S. Department of Agriculture. "Single Family Housing Direct Home Loans in New York." Accessed October 22, 2022.
- U.S. Department of Housing and Urban Development. "Homeownership Assistance: New York." Accessed October 22, 2022.
- Zillow. "Compare Today's Mortgage Rates in New York." Accessed October 22, 2022.
- Zillow. "United States Home Prices & Home Values." Accessed October 22, 2022.
- Zillow. "New York Home Prices & Home Values." Accessed October 22, 2022.