New York First-Time Homebuyer Guide

Buying a home in New York comes with benefits. From first-time homebuyer programs that can help cover your down payment to specialized loans with favorable terms, New York state has set out on a mission to assist its residents in finding the right home at the right price. Read on to learn more about first-time buyers programs you can take advantage of in the Empire State, as well as an overview of the buying process. 

Benefits of Being a First-Time Homebuyer in New York 

As every New Yorker knows, the Empire State is truly one of a kind, even for homebuyers. Some of the benefits that you may be able to take advantage of as a New York property shopper include the following. 

• Down payment assistance for low-income buyers: Low-income buyers in New York may be able to access up to $30,000 in down payment assistance depending on eligibility. Some programs may even provide forgivable down payment assistance, meaning that you do not need to pay it back. 
• Mortgage credit certificate: The New York State Mortgage Credit Certificate (MCC) program may allow eligible buyers to claim a federal tax credit equal to a percentage of their annual mortgage interest, providing potential savings over the life of the loan.
• Competitive rate programs: Buyers who get their home loan through the State of New York’s Achieving the Dream program may be able to access a lower interest rate on their loan. This can result in significant savings over the course of the loan, especially as interest rates have risen over the last year. 

Qualifications for First-Time Homebuyers in New York

To qualify as a first-time buyer in New York, you must not have had ownership interest in a property in the last three years. New York uses HUD’s definition of a first-time buyer, which means that you could still qualify for loan and assistance programs designed for first-time homeowners if you lost ownership of the home more than three years ago. 

Questions to Ask Before Buying Your First House in New York

While buying a home helps you build equity as you make housing payments, it’s important to start the homebuying process at the right time. Be sure to ask yourself the following questions before applying for a mortgage loan. 

1. What are Your Personal Long-Term Goals? 

First, think about the long-term implications of buying a home, and consider how this works with your long-term goals. For example, if you travel often throughout the year, the flexibility of renting might be better for you at this moment. If you’re settled into your current space and looking for a long-term way to invest in your family, buying a home could be the right choice. 

2. What is Your Financial Situation?

From the down payment to closing costs and mortgage insurance, buying a home can be a major financial undertaking. Assess your finances and income to see if buying a home is feasible right now. Calculate your debt-to-income ratio (DTI) by subtracting all your ongoing debt payments from your monthly income before taxes. Think about additional expenses that come with owning a home (like homeowner’s insurance and maintenance costs) when assessing your ability to purchase a property at this time. 

3. What are Your Housing Needs?

Your housing needs will determine an appropriate budget for your home shopping and help you narrow down the hunt for the right property. Think about your current and future housing needs, considering factors like the number of bedrooms you need and the distance your home should be from public transportation if you rely on it. Create a list of wants and needs for your future home and consider how feasible it will be to get all your needs in a single property at your current budget. 

4. What is the Real Estate Market Trend?

Examining the real estate trend in your area can assist you in buying a home at the right time. For example, if prices are rising, it could indicate that you’re in the middle of a bull market, and you may be able to afford less home than if you were to buy later. Keep a few homes bookmarked on your computer and track how prices in your area are changing over time to get a great price on your property. 

5. What are Your Mortgage Options?

There are multiple types of home loans, and not every lender offers each loan type. Review the multiple types of loans available in your area and pull your credit score to learn more about loans that you may qualify for. 

First-Time Homebuyer Statistics in New York

• Average home price in New York: $449,285

• Minimum down payment in New York: 0% to 3.5%

How to Apply for First-Time Homebuyer Loan Programs in New York

While some first-time buyers are concerned by the mortgage process, the truth is that getting a loan is a relatively straightforward endeavor. While your specific buying process might vary by lender, you will go through the following basic steps when you buy your first home. 

1. Determine Your Budget 

Before applying for loan pre-approval, you will want to be sure that you can afford to support a mortgage loan at this time. Use our mortgage calculator to calculate the full monthly cost of a mortgage payment and compare it to your current income and rental payments. If it looks like a smart time to enter the market, it’s time to learn more about mortgage lenders.

2. Get Pre-Approved for a First-Time Home Mortgage

If homeownership seems to be in the financial cards for you and your family, the next step is getting pre-approved for a home loan. A mortgage loan pre-approval will include a specific dollar amount that you’re approved for in funding, which you can use as a maximum loan amount as you shop. 

Now can also be a good time to apply to one of New York’s down payment assistance and loan programs, issued through the State of New York Mortgage Agency (SONYMA). Some current programs include the following. 

• Achieving the Dream: The Achieving the Dream program is a loan program offered to low-income buyers that reduces the down payment requirement to 1% to 3% on a 30-year loan. It also offers more competitive interest rates and can be combined with the SONYMA down payment assistance program. 
• Down payment assistance: SONYMA offers a corresponding down payment program, which offers up to $15,000 in down payment assistance for low-income residents. This is offered as a forgivable loan, which does not need to be repaid if you live in the home for 10 years. 
• DPAL PLUS: In light of rising home prices, New York has recently introduced the DPAL PLUS loan option for residents who earn 60% or less of the median local income. This loan may allow you to access up to $30,000 in down payment and closing cost assistance. At this time, DPAL Plus is only available in target areas of Buffalo, New York, but may be expanded to additional regions in the coming years. 

Additional down payment assistance may be available on a local basis. Review your new town or borough’s local government online before you move to learn more about the programs available to you.

3. Hire a Real Estate Agent 

A pre-approval letter tells lenders and homeowners that you’re serious about buying a home. The next step after being approved for financing is to connect with a real estate agent. Real estate agents are local property professionals who can help guide your search for the right home and decide how much to offer when you find the right match. NAF Homes,* an affiliate of NAF, can be a good jumping-off point on your search for local agents. 

4. Start the Search for Your Dream Home

Your agent will help you through the home shopping process, visiting properties with you until you find the perfect match. As you walk through each home, take the time to open closets and test basic amenities like toilets and sinks. Don’t be afraid to request that your agent continue to put together showings until you find the perfect home. 

5. Make an Offer 

When you find a home that fits your needs, you will submit an offer letter proposing that the seller agrees to sell you the home. Your real estate agent will work on drafting the letter, comparing local sales data to advise you on a competitive price to offer. It’s usually a good idea to leave the writing of the offer letter to your agent, as they will know how to write a legally binding letter that includes all of your top interests. 

6. Conduct Home Inspection 

The home inspection is another important part of the buying process. During an inspection, a home inspector will take a tour of the property you’re going to buy and take note of any areas where repairs may be needed. This report gives you valuable insight into how much you’re likely to spend on tune-ups and repairs after closing on your home loan.

7. Close the Deal and Become a Homeowner

Finally, you have reached the last step of the buying process, closing on your home. During closing, you will sign off on your new mortgage loan and take control of your property. Remember to bring a government-issued photo ID and proof of your down payment transfer to closing to keep things on track. 

Traditional First-Time Homebuyer Programs in New York

There are multiple types of mortgage loans and homebuyer programs, with the right program varying depending on your situation. The following are some of the most common loan products used by first-time buyers. 

Conventional Mortgage

A Conventional loan is a common type of mortgage not backed or insured by a government entity. These loans typically require higher credit scores and down payments compared to government-backed loans, but they offer greater flexibility in terms of property types and loan amounts. Conventional loans are popular among borrowers with strong credit histories and financial stability who are looking for a loan with the lowest interest rate. 

FHA Loan

An FHA loan, backed by the Federal Housing Administration (FHA), is a type of mortgage designed to assist homebuyers with lower credit scores and limited down payment funds in acquiring affordable housing. FHA loans typically require a lower down payment (as low as 3.5% of the home's purchase price) compared to Conventional loans, making homeownership more accessible if you have less money in savings. However, FHA loans also involve mortgage insurance premiums to cover the lender's risk, which adds a monthly expense to your budget.

VA Loan

VA loans are mortgages aimed at providing eligible veterans, active-duty service members, and certain members of the National Guard with the opportunity to secure home financing with favorable terms and low down payment requirements. A United States Department of Veterans Affairs (VA) loan may allow you to buy a home with a 0% down payment, and credit requirements are more favorable as well. You will need to first get documentation of your service from your local VA office before being approved for a loan. 

USDA Loan

A USDA loan, administered by the United States Department of Agriculture (USDA), is a type of mortgage program designed to provide affordable housing options for individuals in rural and suburban areas. The primary purpose of USDA loans is to promote homeownership and stimulate economic development in less densely populated regions. These loans offer favorable terms such as low or no down payments and competitive interest rates, which can be major benefits if you don’t qualify for a Conventional loan. 

Unlike other government-backed mortgage loans, USDA loan eligibility is primarily based on location. To qualify, the property you’re purchasing must be located in an eligible rural or suburban area, and you must not earn more than 115% of the median income in your area. Creditworthiness and income may also be considered depending on your lender. 

Closing Assistance Programs

In addition to the state programs listed above, a number of New York towns offer their own down payment assistance. For example, residents of Albany who identify as Black may receive up to $10,000 in forgivable down payment assistance through the city’s Restorative Housing Justice Fund. Research local closing cost and down payment assistance programs to learn more about the kind of help you could qualify for. 

What are the Mortgage Rates in New York?

Mortgage rates are constantly changing based on factors like federal interest rates and the overall movement of the economy. Keeping track of current rates can help you gauge the housing market, plan your budget, and decide which loan product might be right for you.

Buying in the Big Apple

There are plenty of benefits that come with buying a home in New York, including forgivable down payment assistance as well as a variety of government-backed loans. The process of buying a home starts with calculating financials and getting preapproved for a loan. Then, connect with an agent and begin exploring properties before submitting an offer letter and closing. 

Your Loan Officer at NAF will be happy to answer any questions you may have about buying  a home in New York. They’ll walk you through the homebuying process and help you find the right loan for your unique needs.

New York First-Time Homebuyer FAQs

Is There an Income Limit for First-Time Homebuyers in New York?

No, there is no state income limit for first-time buyers in New York. First-time buyer programs that have income limitations are usually relative to the area you’re buying in. For example, the USDA loan program dictates that you cannot earn more than 115% of your local relative income to qualify.

Can a Person With Low Income Buy a House in New York?

Yes, there are multiple programs in place in New York aimed at helping homebuyers with low income secure a property. For example, the DPAL PLUS program can provide up to $30,000 for low-income buyers to put towards a down payment. Government mortgage program options like the FHA loan can also make the dream of buying a home easier for those working on building credit or who have a lower income. 

How Much Does a First-Time Buyer Have to Put Down in New York?

Most first-time buyers will need to put between 3% and 3.5% down when shopping for a home, as this is the minimum for Conventional mortgages and FHA loans, respectively. If you qualify for a USDA or VA loan, you could be able to buy a home with $0 down. 

Does New York Have First-Time Buyers Programs?

Yes, New York offers a series of first-time buyers programs issued through the SONYMA. Various local governments also offer down payment assistance with variable qualifications. 

Do You Have to Pay Back Down Payment Assistance in New York?

Depending on how you receive your down payment assistance, you might not need to pay back your down payment assistance. For example, if you receive the SONYMA down payment assistance, it could be forgiven if you live in the home for at least 10 years. Review specific loan details of the financial assistance you receive to learn more about when and if the assistance requires repayment.

 

* NAF Homes, Inc. is an affiliate of New American Funding and does not originate mortgage loans or issue loan commitments.  NAF Homes, Inc. is a MI Real Estate Broker #6505431109, Tel. 844-626-1300.

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