Thinking about buying that first house in New York? This guide covers what first-time homebuyers need to know about the mortgage process in New York. There’s information on mortgage rates, where to get financial help for a down payment or closing costs, as well as an overview of government lending programs specifically for first-time homebuyers.

1

Understanding New York Mortgage Rates

Current Last Week

New York mortgage rates continue to hover near record lows. Rates vary widely from major metropolitan areas like New York City to more rural areas in the Fingerlakes Region upstate. To determine what rate you can expect, start by pulling your credit reports and check those scores.

It’s free to check your credit scores once a year through the three major credit reporting companies: Experian, TransUnion and Equifax. Credit scores are key to what interest rate you’ll get on a mortgage from a New York lender.

Learn more about factors that drive mortgage rates.

2

First-Timer? Get Homebuying Help in New York

The State of New York Mortgage Agency (SONYMA) has five mortgage products to help first-time homebuyers in the state. It finances home loans with the sale of tax-exempt New York bonds. Each loan is tailored variously to the needs of low-income homebuyers, veterans, people who need to remodel or repair a home, and more.

The agency also offers a comparison calculator to help homebuyers compare SONYMA rates with prevailing FHA rates, before applying for a loan, to determine the best offer.

Financial Assistance for First-Time Buyers in New York

Saving for a sufficient down payment can be difficult for many first-time homebuyers in New York, where the median price of a house is $586,900.

Here’s a list of resources for first-time homebuyers, including financial help and real estate education programs throughout New York State:

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3

Understanding Home Affordability in New York

New York’s economy and housing demand affect real estate prices and mortgage interest rates. In 2012, according to the state comptroller’s office, 33.9 percent of New York state homeowners were exceeding the affordability threshold, which is an income to mortgage ratio of 30 percent. The comptroller’s report is based on the most recent year of authoritative census data. About 15 percent of New York homeowners spent more than half their monthly income on housing expenses.

One reason for these tightening household budgets is a decline in median income across the state over the last few years, especially in major metropolitan areas. The median household income in New York City between 2010 and 2012, for instance, was $50,711, down from $54,057 in inflation-adjusted dollars for 2007-2009.

How New York Mortgage Rates and Home Prices Affect Monthly Payments

Metro Area Estimated Monthly Mortgage Payment* Q1 2016 (Change from Previous Year) 2015 Median Home Price 2014 2013
Albany-Schenectady-Troy $906 $193,000 (+1.70%) $206,300 $202,000 $202,600
Binghamton $498 $106,000 (+10.20%) $113,000 $112,500 $111,600
Buffalo-Niagara Falls $584 $124,500 (+6.10%) $129,800 $129,000 $131,000
Elmira $494 $105,300 (+2.90%) $105,500 $100,800 $111,100
Glens Falls $752 $160,200 (-2.70%) $169,300 $165,700 $160,600
Kingston $898 $191,300 (+9.90%) $196,200 $200,100 $207,900
New York-Northern New Jersey-Long Island $1,788 $381,000 (-1.00%) $397,900 $395,900 $391,800
New York-Wayne-White Plains $2,196 $467,900 (+0.30%) $475,900 $468,200 $465,700
NY: Nassau-Suffolk $1,984 $422,600 (+4.60%) $422,700 $405,900 $396,800
Rochester $563 $119,900 (+0.80%) $132,700 $125,300 $126,300
Syracuse $537 $114,400 (-3.30%) $128,300 $125,800 $125,500

Source: National Association of Realtors Q1 2016 Metropolitan Median Area Prices and Affordability report.
*Estimated Monthly Mortgage Payment is based on median home prices for the metro area in Q1 2016 and a 30-year fixed mortgage with today’s rates.

4

Figure Out How Much You Can Borrow in New York

The FHA sets county-by-county lending limits on federally-backed mortgages in New York. The lending cap ranges from $271,050 to $625,500 for a one-family house. Loan amounts are typically determined by the borrower’s income to housing cost ratio, which is usually no more than 30 percent of monthly income. Here is a breakdown of lending limits throughout New York State:

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5

Buying a Home in New York: Hear from the Experts

Susan Cotner is director of the Affordable Housing Partnership in Albany, NY.

Rodney Grierson is program manager of homeownership with Neighborhood Housing Services of NYC, Inc.

What do first-time homebuyers need to do to start the mortgage lending process?

Cotner

The first step we think is to check your credit and you’ve got as good a score as you possibly can have. We help folks understand how their score could be improved, maybe paying down a credit card or getting a credit card and establishing some credit. If you start early enough, we have a matching savings program for first-time buyers – you can earn up to $4 for every $1 you save up to certain limits.

There are also a lot of programs in New York that provide direct down payment help. Here in Albany, we have the Buyer’s Choice Program that provides up to $30,000 for down payments and housing repairs. We partner with the Albany Community Land Trust on that program.

Grierson

Most people don’t really have a clue where to start. They want to buy a home but it’s like a minefield. We do pre-purchase counseling. We’ll discuss credit, savings and affordability. So wherever the deficiency is, getting savings started, credit issues, we work with them to address those deficiencies. Once that is sorted out, we work with them to get them mortgage-ready. Wherever you’re thinking about buying, I would suggest getting as much education on the local market as you can.

Best advice for people with credit scores on the fence? What can they do to improve their credit-worthiness to qualify for financing?

Cotner

We encourage folks to take the time they need to get the right score. Every time you make a positive move, make a payment, pay off a debt, you’re moving toward a better score and that can get you a better interest rate. We recommend taking a year to 18 months to get financially ready.

Grierson

If there are any outstanding collections on their account, they need to be paid off. Judgments and liens are a little more serious and will hamper a credit score. Debt to income is also important. If the person is maxed out on their cards, that can be a drawback and we advise people to reduce their debt to 30 to 40 percent of their credit limit. For severe cases, we refer people out to a credit counseling agency.

Is there adequate inventory in New York for first-time homebuyers? Are there enough houses within the price range of your average first-time homebuyer?

Cotner

We’re upstate New York and affordability is very geographic specific. It is hard to find affordable housing in our market, houses going for probably less than $150,000.

Grierson

The houses in our area (Brooklyn) are not really affordable to a lot of people. House prices in Brooklyn are exorbitantly high. It is a challenge. So what we have to do is open our customers’ minds to the option of co-ops and condos. It may not be a single-family home, but it’s still a home. You’re looking at $400,000 as the average for a single family home in this borough.

With successful completion of our homebuyer education class, each prospective homebuyer receives a certificate that verifies eligibility for a forgivable loan that’s up to $15,000 towards the purchase of a home. The certificate is good for six months. From there, the first-time buyer takes the certificate to a lender to get pre-approved for a mortgage, then they can start working with a realtor.

6

Planning for New York Closing Costs

No matter where you live in New York or what house you buy, just about everyone involved with the sale will take a bite from your bank account. Beyond the realtor’s fee, expect to pay a loan origination fee on the mortgage, title research and insurance, and attorney’s fees if you use a lawyer. New York requires a house valuation before closing on the property, so you’ll pay an assessor’s fee, too.

The state’s Affordable Housing Corp. partners with numerous organizations to offer financial help with closing costs to qualified buyers. Eligibility is income-based and limited to first-time homebuyers in New York.

More information on how lenders set closing costs and what you can expect can be found here. Average closing costs in New York:

Average Closing Costs in the Empire State

Average Origination
Fees
$1,032
Average Third-Party
Fees
$879
Average Total Closing
Costs
$1,911

Source: Bankrate’s 2015 survey of closing costs.

Refinancing a Mortgage in New York

New York mortgage lenders offer refinancing to qualified borrowers. Re-fi loans can save borrowers money since the rate may be 2 percentage points or more below the prime rate on a typical 30-year mortgage, with all other factors like credit scores being equal. The best interest rates will be available to borrowers with a credit score of 740 and up, so before applying for a re-fi in New York, it’s a good idea to pull your credit reports again and make sure there are no errors. Also, plan for closing costs on a re-fi loan, typically 3 percent to 6 percent of your outstanding principal. A re-fi loan is typically for 15 years. As with any mortgage product, real estate experts in New York recommend talking to several lenders before settling on a loan.

For a deep dive into mortgage refinancing, with more tips, check out this MoneyGeek guide.

Other Mortgage Resources in New York

State of New York Mortgage Finance Authority

Government-backed mortgage products catering to first-time homebuyers in New York State.

Homebuyers Glossary

Terms and definitions useful to understanding the New York mortgage process.

HomeFirst Down Payment Assistance Program

New York City residents can get up to $15,000 in down payment assistance through the city’s Housing Preservation & Development department. First-time buyers will have to meet income requirements and take a homebuyers course.

NYSAR Housing Opportunities Foundation

Created by the New York State Association of REALTORS, the foundation has helped more than 150 families since 2003 buy their first homes through grants and other financial assistance.

The New York State Association of REALTORS Grant Program

Application for grant dollars to help with down payments and closing costs.

Homeownership Assistance – New York HUD

Lists state-specific financial programs available to first-time house buyers through the US Department of Housing and Urban Development as well as local programs from cities and neighborhoods.

Foreclosure Prevention

New York state resources on stopping foreclosure and getting help in keeping your home.

Capital Region Down Payment Assistance

Through the AHP Homeownership Center, buyers can find programs offered by municipalities and other nonprofit organizations throughout New York’s Capital region.

Grants for First-Time New York Homebuyers

Income-based financial help from Community Housing Innovations of New York for those who want to buy within Westchester, Nassau and Suffolk counties.

Free Homebuyer Orientations

A schedule of classes held throughout New York to help first-time buyers understand the home buying process.