It’s a great time to be a first-time homebuyer in New York.
That statement might make people do a double take, as the ridiculously high prices of real estate in New York City are a common topic of conversation in the property community. But as any true New Yorker knows, the city is just one tiny portion of the Empire State – a place with a thriving economy, a diverse population, and plenty of housing opportunities throughout.
This article will take you through the ins and outs of finally becoming a homeowner in the great state of New York, so you can know all of the options that are available to you.
Types of Mortgage Loans Available in New York
New Yorkers can qualify for many different types of loans as first-time homebuyers. We’re going to touch on both the state and federal options so that you can be sure to pick the one that’s the best for you.
Federal Loans Available in New York
New Yorkers have an international reputation for being fiercely independent, but also for being incredibly business savvy. This is why those who live in New York State are the first ones to take full advantage of the many excellent federal loan programs for first-time
homebuyers. These loans are very easy for many New Yorkers to take advantage of and are definitely worth looking into!
Here are the most common types of federal loans that New Yorkers like to use:
As a person buying a home for the first time in New York, you can easily qualify for a conventional loan. These loans usually have competitive interest rates and sometimes come with a down payment of only 3% of the purchase price. However, in order to qualify for them, you need to check all the applicant boxes for lenders like Fannie Mae and Freddie Mac.
Okay, but what if you have more than 3% saved? That’s awesome! If you can put down the traditional deposit of 20% on a conventional loan, then you don’t even have to buy private mortgage insurance for it, which can save you money in the long run.
If you have a non-traditional credit history, or lower monthly income limitations, you can still become a homeowner in the State of New York with the help of an FHA loan.
FHA stands for Federal Housing Authority. The FHA is a subsidiarity of the United States Department of Housing and Urban Development (sometimes called the HUD). The government created the FHA during the peak of the Great Depression to help make homeownership more accessible to more Americans.
Basically, as long as you can prove you are a hard worker, have a steady job (no matter the pay scale), and are striving for financial stability, you can use one of these government-backed loans to secure your first home.
A great example is that as long as you can put 20% of the balance down at closing, you can buy a home with a credit score of 500! That’s nearly 200 points lower than what a typical lender normally looks for.
If you or your spouse have ever served as in the United States military, then you can be eligible to receive assistance from the Department of Veterans Affairs to help you purchase your house.
These loans are a great option for when you want to purchase a home in New York because of their low-interest rates. Some of these loans also feature no minimum credit score, down payment, or requirement of mortgage insurance.
Those living outside of the state often forget that large swaths of New York are actually very rural. If you see yourself settling down in upstate New York, say near Lake Placid or Buffalo, then using a USDA loan to buy your first house is a perfect fit.
Even if you don’t have a traditional credit history, you can still qualify for this loan if you have things like rent or utility payments on file to prove your current financial situation.
State Loans in New York
New York also runs a number of state-specific loan programs. New Yorkers help their own and look out for each other, so it would make sense that the state would have such awesome programs ready to go for its residents.
SONYMA is the State of New York Mortgage Agency. This agency handles loans for many first time homebuyers in the state and often partners with non-traditional applicants.
There are not any credit score requirements for these loans and they do offer down payment assistance. However, if you can’t put at least 20% of the home’s total down when you buy it, then you must take out Private Mortgage Insurance (often called PMI).
Because of all the concessions, there are a few strict eligibility requirements that you have to follow in order to be eligible. The first is that you have to have at least three solid lines of credit open and have had them for at least two years. These lines of credit must always be paid on time.
Your debt-to-income ratio needs to be less than 45%, you must have two years of employment history, attend a first-time homebuyer education course put on by the state, and have an LTV (loan to value) ratio of 97% for single-family homes.
This might seem like a lot, but they are all very achievable.
NY Mortgage Credit Certificates
The MCC program is a great alternative to using SONYMA for first time homebuyers. Basically, in this program, your lender converts 20% of your annual mortgage interest into a tax credit and deducts it, dollar for dollar, from your income tax liability.
Then, you can still itemize the remaining 80% of your mortgage as a tax deduction. This helps to lessen the amount of taxes that you can to pay each year, provided that you remain living in your home. However, these mortgage credit certificates can only really provide relief if you have quite a bit of federal tax liability in the first place, as the program only works to offset this credit.
Achieving the Dream Program
This loan is another great option for first-time homebuyers in New York. It functions as a payment assistance loan because it offers first time lower income homebuyers reduced interest rates, and lower down payment options when they take out a traditional 30-year mortgage.
This loan also works with purchasing and renovating a one or two unit home and also offers a big incentive for buyers to purchase energy efficient homes.
Best Places To Live in New York
The Empire State is a great place to live.
There are smaller pockets of culture everywhere (from little Italy to Mexico and everything in between) meaning that the state is brimming with great food and great people.
While places like New York City are obviously going to be prohibitively expensive for most first time homebuyers, the more rural, less televised parts of the state often have plenty of more affordable options.
New York is a business-oriented, no-nonsense kind of place. But it’s also a state with a strong, interconnected community that can put other states to shame. Because of this, it’s a perfect place to buy a home, especially for the first time.