1. Make lists with your significant other.
If you’re purchasing your first home with your significant other, sit down together and make separate lists of everything you want in your new home and neighborhood. When finished, compare your lists and make sure you’re on the same page before you start shopping.
2. Pay off debts and start an emergency fund.
Homeownership is often much more expensive than people anticipate and qualifying for financing can be tough. Start off on the right foot by paying off revolving debts, like credit cards, and installment loans on things like vehicles. Then, get yourself set up with an emergency fund to cover your living expenses for 3-6 months, so you’re not tempted to rack up more debt if things get tough.
3. Check your credit score and don’t open new lines of credit.
Most people are well aware that their credit score will be hugely important when it comes to getting approved for a mortgage, but it can take time to work out kinks. When you start to seriously consider purchasing your first home, run a check on your own credit. Per government regulations, you’re entitled to a free report from each of the main credit reporting agencies each year, and each may have slightly different information. Correct any inaccuracies that may be harming your credit and, if you’re low, take steps to improve it before you apply for a mortgage. Once you’ve got it where you want it, don’t take any actions that involve having your credit checked. Doing so will show mortgage companies you may be opening up new lines of credit, which can make you look like a riskier buyer.
4. Hire a buyer’s agent/ broker.
Generally speaking, fees for real estate agents and brokers are paid by the seller. If you aren’t represented, the selling agent/ broker gets the full commission. If you are, the commission is split between the two. Your agent will help identify homes and neighborhoods which fit your criteria, negotiate, walk you through the process, and be your advocate—a major boon for first-time buyers!
5. Think 3-5 years ahead.
Chances are, you’ll lose a significant amount of money if you have to move again within the next year or two. This in mind, you’ll want to think about what your needs will be like 3-5 years from now before you start shopping.
6. Ditch emotions.
Emotional buyers often spend more than they can afford or wind up with other regrets. Even in tough markets, you’ll have multiple opportunities. Check your emotions before you start shopping.
7. Know how much you can afford and don’t exceed your limits.
Advice in this respect runs the gamut. Some experts say for property to be affordable, it shouldn’t exceed 30-40% of your take-home pay, while others say stick to 25% or less. Research presented on Realtor.com offers two quick methods to determine affordability in NYC. The fastest method is to triple your yearly income and use that as a guide for home pricing. However, if you have debts (see #2) and don’t pay them off, you’ll want to calculate your debt-to-income ratio and keep it at 36% or less.
8. Crunch the numbers using various programs.
You’ll probably qualify for a number of loan programs, such as conventional, FHA, and VA, if your credit is decent and you have stable income. Become familiar with multiple programs to identify which, if any, may work for you and what costs you can expect.
9. Have 20% to put down.
Many loan programs allow you to get into a home without having 20% to put down. That may sound like a great deal but bear in mind that you’ll have to pay for private mortgage insurance (PMI), which typically amounts to 1% of the loan value per year. Pulling the data from Zillow, the average New York home price is $677,000, meaning PMI is $6,770 per year or $564.17 per month. That is money you don’t get back and does not go towards your payments.
10. Save 3-4% for closing costs.
There’s a whole lot of talk about saving here, but the importance cannot be overstated. You will likely have expenses related to the appraisal, home inspection, attorney’s fees, and homeowners insurance. You can sometimes roll this into the mortgage, but it doesn’t make financial sense to do so. Set aside 3-4% of your anticipated home value for closing.
11. Budget for moving and move-in expenses.
In a previous blog, we broke down how much it costs to move in NYC based upon borough and number of rooms. You can calculate your own figures, but suffice it to say, the minimum is a little under $5,000, and that’s being very conservative. If you’re wanting to purchase new furniture or are starting from scratch, you’ll probably need to set aside $7,000+ to get moved in and set up.
12. Get pre-qualified.
Don’t shop for a home until you’re pre-qualified. Explore your options with several lenders to make sure you’re getting the best terms. That way, when you start shopping, you’ll already know what your ceiling is and may have a bit more bargaining power.
13. Shop around for homeowners insurance.
You’ll need homeowners insurance to protect your investment and it may even be a requirement for your mortgage. However, that doesn’t mean you need to pay an arm and a leg for it. Shop around to find a good deal, but remember to read the fine print, so you get the level of coverage you need.
14. Budget for repairs.
Although our cheat sheet for calculating the cost to move in NYC covered a lot of things, it didn’t include anything for repairs, simply because there’s such a wide variance. Data from Bankrate concludes the average homeowner spends $2,000 annually on maintenance services, but it’s important to note that’s an average. New homeowners tend to spend more as they get established, especially if they purchase a fixer upper. Research compiled by the National Association of Realtors (NAR) indicates more than half of all new homeowners undertake a home repair project within three months of purchase and spend an average of $4,550 in improvements.
15. Focus on neighborhood quality before the home.
As NAR research further notes, homeowners are more concerned with neighborhood quality than they are about the size of their home, so it pays to start off by looking at the right areas before looking for a home. If you’re looking at buying a home in New York City, check out these guides we’ve put together on the best neighborhoods in Brooklyn, Manhattan, and Queens.
16. Consider the commute.
In addition to neighborhood quality, NAR found that more than half of homebuyers would trade a larger yard for a shorter commute if given the option. As you explore various neighborhoods, try making the commute to work at least once during peak traffic periods to ensure it’s something you can manage every day.
17. Check crime stats.
Don’t rely on word-of-mouth reports. Check the crime stats for yourself before looking into homes in any given area.
18. Learn the layout.
Think about the services you typically use or might need, from grocery stores through restaurants, pharmacies, and hospitals. Then, do a quick map search to see if you’ll have easy access in the neighborhoods you prefer.
19. Know the schools even if you don’t have children and never will.
Good schools increase property values. If you choose an underperforming area, your property values won’t rise as much as others.
20. Visit homes you have no intention of buying.
It probably sounds crazy, but the more you visit homes in areas you’re considering moving to, the more of an expert you’ll become. You don’t need to book private showings, but if you see notices for open houses, pop in.
21. Select the cheapest home in the best neighborhood.
Chances are your first home will not be your last, so it’s better to select something that has strong potential to rise in value. This in mind, search for the best neighborhood you can find for your needs, and then pick the cheapest home you can work with. Homes are malleable, so you can adapt it to suit and make improvements that will increase its value when you sell.
22. Scout the neighborhood repeatedly.
It’s hard to know what an area is really like unless you visit it quite a bit. Stop by your favorite haunts on different days of the week and vary the time of day. That way, you’ll learn if the place is unusually noisy at night, has abnormal daytime activity, or simply doesn’t feel right.
23. Find out if there are neighborhood or building fees.
HOA and co-op fees are commonplace and can add a considerable amount onto your monthly payments. Make sure you won’t be surprised with fees as you’re moving in.
Your title agency should make sure the property is free and clear, but you may want to have a separate land survey done to make sure you know your boundaries. Don’t rely on the seller to give you accurate information.
25. Check on building permits in the neighborhood.
If possible, find out if there are any plans to build in the neighborhood. That way, you can avoid purchasing a home that will soon be adjacent to a pub if you’re not into the nightlife scene, a neighborhood park if you don’t have children, or wind up with any other unexpected neighbors.
26. Chat with neighbors.
Pop over and introduce yourself before making an offer. If you’ve selected your neighborhoods wisely, neighbors will be glad to walk you through what living in the area is like and will tell you everything they know about the property.
27. Have an independent inspection done.
Don’t rely on the appraisal performed by the lender. Make sure your contract allows you to choose a licensed engineer or architect and to cancel or renegotiate if the professional finds issues. You’ll also need to verify what’s included in your inspection. Some do not cover things like pests, mold, or radon.
28. Have your agent determine a competitive offer.
This is one area where having an experienced agent or broker on your side really pays off. You’ll naturally want to give the seller an offer that’s tempting without overpaying for the property. A great agent will also handle negotiations if you come in under or need to go back to the bargaining table over inspection issues.
29. Start a homeowner journal or binder.
You may think you’ll remember all the changes you make to the property, but as the years roll by, you won’t. You’ll forget which providers you used, what year you purchased appliances, and when you made major repairs. Because of this, it’s a good idea to start a binder or a journal when you move in. Keep notes on insurance, repairs, costs, and other information. Your binder will also come in handy when it’s time to sell too, as buyers love to know all the details, including who they can trust to handle repairs.
30. Don’t bite off more than you can chew.
You want the place to feel like home and suit your needs yesterday. Fair enough. However, if you start doing too many projects at once, you’ll wind up with none of it done and you’ll be living in a home that’s torn apart for ages. Start small and tackle one repair at a time. You can add more on as you build up expertise.
Hire an Experienced NYC Moving Company
It’s always best to have an expert on your side, especially when you’re doing something for the first time. For that reason, you should absolutely connect with a professional in real estate, law, finance, appraisals, and other specialty areas before making a big decision or taking advice from any source at face value. At Metropolis Moving, we’re a professional NYC moving company, which means we can help make your local or long-distance move a breeze and are glad to answer all your moving-related questions.Contact us for a free moving quote.