How Much Should I Put Down?
One of the questions we are asked about most often is about the size of the downpayment. In most of the country, this answer is determined by credit and income factors. Lenders offer pre-loans that require anywhere from 5-20% downpayment - so in theory many first time home buyers would be financially qualified to buy a home with as little as 5% down.
However, the New York housing market it unique, and a number of factors drive us to advise almost all buyers to consider 20% downpayment a minimum for purchasing a home in NYC.
First, a majority of the apartment inventory in New York City (roughly 70%), are co-ops. Co-ops are unique to New York, and most require a minimum downpayment of at least 20% down, with some requiring higher percentages, with 25% most common, and even higher amounts more rare. For more information on what a coop is and other financial requirements they might impose, see our earlier post here.
Condos typically allow buyer to put as little as 10%, but in reality, where demand for a particular unit is high, we find that 10% is simply not competitive, even if those prospective buyers are offering a higher purchase price. A higher downpayment gives the seller more assurance that financing is not going to be an issue, either due to the borrower's qualifications or factors related to the building or specific unit. Thus, especially at lower price points (under $1.5M), we advise our buyers to be prepared to put 20% down, even if the building permits greater financing.
Also note that in addition to downpayment, buyers should be prepared to have the liquidity for closing costs. We've outlined these costs here, but note that they are much higher when a buyer is financing a condo than a coop. That said, coops will have reserves requirements, so in either case, a buyer must be in a position to have additional cash beyond the downpayment to complete the purchase.
The structure of your offer, not just the number, is important when buying a home in New York City. An experienced and knowledgable buyer's agent will advise you on what range of purchase prices you are most qualified for and how you can structure your offer to be the most competitive.