If you’re contemplating buying a new home, there are a few vital questions that should be asked, even before you start attending open houses and getting your heart set on one property or another. Among those questions might be, “How do I start the process?” “What can I afford?” “Does the right home exist in my budget?” “Should I buy a co-op, condo or townhouse?” “Will I be approved for financing?” “Will I be approved by a co-op board?”
Before entering the market, I advise my clients to follow a few basic steps to ensure that they will ultimately have a successful and happy ending to their real estate search. When one is ready, willing, able and properly prepared to jump into the exciting real estate game, they can look forward to a winning outcome.
The Preparation: Budget Evaluation:
First, decide what down payment you feel comfortable spending; the customary deposit upon executing a contract of sale is 10 percent of the purchase price, and those funds should be available when you begin your search. When purchasing most co-ops, another 10 to 40 percent will be due at closing, depending upon the building’s financing requirements, and the remainder will be provided by your lender, unless you plan to purchase with all cash. If you choose to purchase a condo, sponsor apartment or single family townhouse that allows you to finance up to 90 percent, then additional funds will not be required at closing. Obviously, your liquid assets will determine what type of property is most appropriate for you.
Second, thoughtfully determine your appropriate total annual expenditures, which should not exceed more than 35 to 40 percent of your reported gross income, including all mortgage payments for both primary and other homes, and maintenance or common charges and taxes, utilities, parking, etc. Keep in mind that your total annual housing expenses, which include only mortgages and maintenances or common charges and taxes, should not exceed approximately 25 percent of your gross income when being evaluated by the board of directors of a building.