New York City Home Financing Guide
Financing a home is one of the most difficult parts of the home owning process. Frequently, people turn to home loans to help with the costs. With so many different options, it can often get confusing to try and sort them all out. At the same time, this wide variety means that finding a loan which works for you is truly possible. In the following list, we’ll take a look at the numerous choices at your disposal for home finance, and break them down in a way that will help and inform prospective owners.
Fixed Rate vs. Adjustable Rate Mortgages
Almost all home loans will offer these two mortgage options:
Fixed rate mortgage is a fixed interest rate that stays the same for anywhere between fifteen and thirty years in most cases. While this can often leave homeowners stuck in the same contract, it also helps to know just how much you are paying year in, year out. For those who value certainty and don’t plan on moving to another home any time soon, fixed rate is the way to go for a good investment.
Adjustable rate mortgage initially starts out at a lower rate than fixed rate, but after an agreed upon amount of time will begin to go up based off of interest rates. These adjusting rates often occur once a year. Adjustable rate is good for both those with bad credit and people who aren't looking to settle down in their current home for too long.
FHA are the most likely loans for first-time buyers. This is mainly because the requirements for credit score are low, and requirements for down payment are low as well. Even if someone cannot afford the down payment, there are many payment assistance grants available. FHA 203K rehab loans allow for buyers to invest in “fixer-upper” homes that require renovation and money for repair. Although credit scores are higher for the 203K loans, they give homeowners the possibility to create a home of their own design. This is not available under standard FHA loans, which require homes to be in livable condition already. David Aharoni, Manhattan Real Estate Broker, believes that these loans are the way to go for those who are unfamiliar with the home owning process: “It can be very confusing trying to find a loan deal that compliments both your vision and your budget. With the FHA, both standard and 203K, it gives owners financial flexibility and offers them the chance to truly design the home or apartment of their dreams on a plan that works for them.”
A veterans-exclusive option, VA loans are a great opportunity for those who served. One major advantage is that to qualify for a home loan, down payment and mortgage insurance are not required. As Mr. Aharoni says, “ VA loans are a good way for veterans to not only find available housing but to also save some cash. The lack of insurance needed can save them over $2,000 dollars annually.” VA loans are a terrific option provided by the government, and a good way to help repay those who have sacrificed for our country.
The USDA, more known for agriculture than home loans, also offers up a program. They offer no-down-payment loans and low mortgage insurance to “rural” residents. While at first glance this feels like it won’t apply to apartment or condominium owners located around New York, 95% of potential homeowners are qualified. Conforming Home Loans These loans are not insured to the government, and require stellar credit scores. Offered by private lenders, if one wishes to purchase property, whether it is a home or a condo, they must do it through conforming loans.
Typically, when one buys a home or condominium, a deed signed to the lender is required once the mortgage has been paid. However, with a co-op, there is no need to give a deed for individual units, with the deed applying to the entire building or apartment. It is a loan that allows you to acquire a “share” in the co-op. While rare, this loan is often offered by smart and experienced lenders, so be sure to give it a look if you are interested in going for a untraditional home loaning route.
In the end, it is hard to pick out the best home loan for you upon first glance. There are a number of factors in play - credit score, apartment or house, location in New York, financial means - which means that rushing into a decision is unwise. Luckily, there are plenty of outlets to help. Our sister company Park Avenue Properties offers a wide range of brokering in addition to helping you find financing. Regardless of where you go for help, it is important to stay informed and aware of current rates and promotions before making this crucial decision in the property purchase process.
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