Buying a house in New York: A how-to

If you’re starting to explore the home buying process in New York, first focus on one big question: New York City or New York state? While the largest city in the U.S. is, of course, located in the state of New York, buying a place in Ithaca versus buying a place in Manhattan is sort of like comparing living on Earth to living on another planet. And the state itself is huge, too, spanning more than 54,000 square miles that stretch from the Atlantic Ocean as far west as the Great Lakes and north all the way to Canada.

With that in mind, there are plenty of nuances to buying a home in New York. Read on for an introduction to some of the most important pieces of the puzzle to get your own set of keys in the Empire State.

How to buy a house in New York

Decide where to live in New York

As you think about where to look for a home in New York, consider the big difference in the lifestyle and expenses between different parts of the state. For example, Bankrate’s cost of living calculator shows that residents in Buffalo enjoy a cost of living that is more than 62 percent lower than it is in Manhattan. (In fact, Buffalo is one of Bankrate’s top five Best Cities for First-Time Homebuyers.)

And if you’re looking at the cost of living in New York City specifically, be very careful with your budget: Price tags vary greatly from one borough to another. Do your research on schools if you have a family, and be sure to factor in your commute time to an office if you’re taking public transit or driving a car.

If you’re wondering how quickly you need to act, home prices in New York are rising — but not as quickly as in other places around the country. So, you can opt to wait a bit longer to buy if you need time to save additional money for a down payment.

Tips for buying a house in New York

As you compare mortgage rates in New York, it’s important to understand whether or not you’ll need to look for a jumbo loan. Jumbo loans exceed conforming loan limits, which vary across the state. For example, if you want to buy a place in Queens, you can borrow up to $970,800 without crossing into jumbo territory. If you’re looking in Wayne County in the Finger Lakes region, though, the limit is much lower: $647,200. The limit is based on how much you need to borrow, not how much the property costs. So, if you’re buying a $1.2 million property in Queens but you’re putting down $350,000, you’re still in conventional-loan territory.

Things to know about buying a house in New York

• Property taxes: Your property tax bill in New York will be fairly high — 1.38 percent of your home’s assessed value. According to the Tax Foundation, that comes out to around $3,180 per capita.
• Dual agency: New York is a state in which your agent might ask you to sign a dual agency consent form. That means that an agent can represent both the buyer and the seller in a transaction, with consent. While this can help connect the right buyer and seller quickly, it also can create an inherent conflict of interest, so keep an eye out to make sure that your agent is acting in your best interests.
• Seller’s disclosure: You will likely receive a disclosure statement from a New York seller, which will include a range of information about any known issues. These can include roof condition, smoke damage or other potential defects that might impact the value of the home. Sellers who fail to complete this statement will owe the buyer a $500 fee, at the very least. Closing costs: Closing costs are high here. According to data from ClosingCorp, they add up to 3.1 percent of the purchase price. In 2021, the average set of closing costs here totaled $16,849. However, there is good news for buyers: A large portion of that money is from the state’s real estate transfer tax, which is typically the seller’s responsibility.
• Attorneys: There must be a real estate attorney present at home closings in New York; it’s a state law. However, it’s wise to hire a lawyer to represent your interests as soon as you make an offer on a home. It’s especially crucial in New York City, as zoning laws and lengthy documents from condo and co-op boards can leave any buyer feeling confused.
• Climate and weather considerations: From Hurricane Sandy in 2012 to flooding from the remains of Hurricane Ida in 2021, it’s clear that parts of New York, both state and city, are becoming increasingly prone to serious storm damage. In fact, New York City estimates that 400,000 residents live in the city’s floodplain. As you look at properties, carefully consider whether you will need to pay for additional homeowners insurance coverage to protect your new home.
• Co-ops: If you’re buying in New York City, it’s important to understand the co-op apartment, a common type of NYC home. With a co-op, you are buying shares in a corporation that owns the building, rather than buying the apartment itself. There can be quite a bit of red tape involved. Co-ops may charge a fee to transfer ownership called a “flip tax,” and all buyers must be interviewed and approved by the co-op’s board of directors — a process many find onerous. If you’re buying a co-op, be sure to ask for a complete and thorough look at the co-op’s finances. A local NYC real estate agent can help you navigate the ins and outs of this complex (but again, very common) process.

How much house can I afford in New York?

There is a simple rule of thumb to follow for a budget framework: Don’t spend more than 28 percent of your monthly income on your housing expenses. So, if you earn $8,000 each month, your mortgage payment should not exceed $2,240. There are other considerations, though. What are your regular monthly expenses? Do you have car payments or student loans to consider as well? Will you have money left over to deal with the regular maintenance of your house and pay New York property taxes? (Remember, once you own something, you can no longer call your landlord when something breaks.) Use Bankrate’s New House Calculator to get a sense of what you can spend without stressing yourself out.

However, it’s not just about the money you’ll pay each month. Buying a house includes loads of one-time fees, and those closing costs are especially high in New York. So, you should only buy a house if you’re planning to hold on to it for a long time.

Saving for a down payment in New York

You don’t necessarily have to come up with a down payment on your own here. From the State of New York Mortgage Agency (SONYMA) Achieving the Dream program for low-income buyers to HomeFirst Down Payment Assistance, which can help first-time homebuyers in New York City score up to $100,000 for down payment and closing costs, there is a wide range of options to help it more manageable. One of the most attractive programs in the state is SONYMA’s DPAL (Down Payment Assistance Loan). This program rewards eligible borrowers with up to $15,000 in a second loan, and if you live in the home for 10 years, you don’t have to pay the money back.

Get preapproved for a mortgage

When you get preapproved for a mortgage, it’s like getting proof that you are a highly qualified buyer who sellers should take seriously. Getting preapproved is a fairly simple process, in which you submit information about your finances — tax returns, pay stubs, bank statements — to a lender for a preliminary review of your ability to afford a mortgage. It’s quick, too: Some online lenders will issue preapprovals in less than an hour.

Find the best lender for you

Preapproval doesn’t mean you’re officially approved, though. You’ll still need to go through the formal application process. You’re not obligated to use the same lender who issued your preapproval, either: Be sure to compare a few other lenders to see who can offer you a combination of the lowest rates and the lowest fees.

And with the high home prices in New York City, a lower mortgage rate really counts. For example, research from NYC real estate platform StreetEasy showed that a 1 percent increase in mortgage rates could cost city buyers an additional $100,000.

Find a local New York real estate agent

You might be wondering if you can buy a house without an agent in New York. You can, but it will be much more challenging. Having the right real estate agent by your side can help make the process feel less overwhelming, and he or she can point you toward new listings that fit your needs. Think about finding an agent the same way you’d think about hiring someone for a job: Set up some interviews, and ask plenty of questions to understand who is the best fit for you.

Agents are especially important for anyone who is buying a home from out of state. If you’re relocating to New York, find a Certified Relocation Professional (CRP) who has experience in assisting other new homeowners navigate the added stress and complexity of searching for a home long-distance.

Start house hunting and make an offer

Timing is everything when it comes to looking for a house. If you’re looking for a home in New York in the winter, for example, expect slim pickings: January and February tend to have the most limited inventory, according to Redfin data. The summer months of June and July have proven to be the busiest home buying months, when you can expect an increase in supply. Be sure to ask your agent to help you understand all the potential fees and taxes associated with the sale (especially in NYC), and whether you can ask the seller to shoulder some of those expenses.

Begin house hunting with an idea of what you need versus what you simply want. For example, if a home’s kitchen isn’t updated, can you live with it for now and take on the renovation project in a couple of years?

Your real estate agent will be your best friend when it comes to figuring out what to offer on a home in New York. He or she will have an understanding of how quickly properties are moving in the area, whether they’re selling for above listing price and if some sellers have reduced their prices recently. Be prepared for some back-and-forth negotiation to come up with a price tag and a timeline that works for both you and the seller. And don’t get too frustrated if you lose out on a property. Buying a home can come with the sting of rejection due to other buyers who have deeper pockets. Keep looking to find a property that’s the right fit.

Get a home inspection and appraisal

Once your offer is accepted, it’s time to make sure that the home is actually worth the amount of money you’re handing over. As soon as you go to contract, hire a professional home inspector to evaluate the condition of the home and look for potential problem spots, like plumbing issues or bad electrical wiring. If you’re financing the purchase, you’ll have to get a professional appraisal, too. This is different from a home inspection and will let your lender know whether the home is worth what you have agreed to pay for it. If it’s not, and the appraisal comes in too low, you may have to renegotiate or pay the difference.

Final walk-through and closing on your new New York home

Make sure you ask your real estate agent to schedule a final walk-through shortly before your closing. It’s one last opportunity to verify that the home is in the condition you expect and that nothing has been damaged during the seller’s move-out. Once you’re satisfied, it’s time to finish the deal. Your attorney will tell you in advance how much money you need to bring to closing, as you’ll likely need to get a certified check. Sign your name (many times!), hand over the check and raise a toast to yourself: You own a home in New York. Enjoy that “Empire State of Mind.”

FAQs

• How much money do I need to buy a house in New York?

  The amount of cash you’ll need to buy a home in New York depends on where in the state you’re looking. If you’re eyeing the New York City area, you’ll need a fairly big bank account: Median sale prices across the region clocked in above $962,000 in June of 2022, which reflects the super-high prices throughout the five boroughs, particularly in Manhattan. Head to Albany, though, and it’s a totally different story: Median sale prices in the state capital are just $257,500. As you compare different purchase prices, keep in mind that you will need enough money to cover your down payment — which can be up to 20 percent of the sale price — along with funds for your closing costs.
  

• Is it worth buying a house in New York City?

  Yes. As Frank Sinatra sang, “If you can make it there, you’ll make it anywhere.” It’s true: This is the epicenter of business in the U.S., and the housing market has proven to be quite resilient. Despite concerns that the pandemic’s work-from-home shift would lead to people ditching crowded cities, even more people are now flocking to New York City — a signal of its continuing allure. If you can afford the cost of living here, it puts you right in the middle of the action. One important caveat, though: There are actual houses in many neighborhoods here, but the vast majority of New Yorkers live in apartments. Condos and co-ops are much more common home purchases in NYC than houses.
  

• What is the minimum down payment on a house in New York?

  The median down payment in New York is just over $55,000. However, since that figure is statewide, it is likely skewed by the higher down payments that are necessary in the expensive Big Apple market. No matter where you’re looking to buy, you will need a minimum of 3 percent of the purchase price upfront, even if you have excellent credit and are taking out a conventional loan. That number will look very different, depending on your location. In Troy, where median prices are $234,000 according to Redfin, it’s just $7,000. In White Plains, where median prices are $569,150, it’s more like $17,000. And if you’re buying in New York City, especially in a co-op, be prepared to hand over 20 percent of the purchase price (or sometimes even more).