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Hey, First Time Homebuyers — Be Sure to Prep Your Finances First

Buying a home is a big deal, and scrolling through the latest listings is often the most exciting part. And now is a great time to jump in with interest rates hanging out at record low. Unfortunately, there’s some work to be put in before that stage makes sense (especially in Brooklyn where the market is red hot). You’ll want to have your finances lined up before the house hunt begins. Below, we’ll share three tips on where to start.

Tip #1: Start With Your Credit Score

One of the first things your bank will look at when you begin the mortgage pre-approval process is your credit score. Most lenders prefer a score over 740 for the best rates, with rates around 680 still being approved. Some banks work with lower scores if you find yourself in need of a little extra support in this area, too — though a lower number may lead to higher interest rates and/or a larger down payment requirement.

Tip #2: Understand All of the Financial Requirements

Buying a home isn’t only about the purchase price and monthly payment. And the down payment isn’t the only fund you’ll need upfront. There’s a good chance you will want to budget for closing costs as well, which can include:

 

  • Your real estate agent’s commission
  • Taxes and fees
  • Attorney’s fees
  • Title insurance
  • Building fees
  • Mortgage and moving expenses
  • And more.

These fees can add up quickly — potentially accounting for 1.5-6% of your total loan.

Lastly, keep in mind that co-ops and condos create their own financial requirements. The chart below lists some facts about the two apartment building types:

Co-Ops

Condos

Around three-quarters of apartment buildings are co-ops.

Only one-quarter of apartment buildings are condos, so they can take longer to find.

Usually require around 20% for the down payment as well as a low debt-to-income ratio.

You can usually finance as much as you like, up to 90% of the loan.

Often have additional rules, such as not allowing sublets.

Closing costs tend to be high.

Maintenance fees are high, as they include the building’s mortgage.

Maintenance fees are lower, but property taxes will add in an additional annual cost.

Tip #3: Work With Professionals Who Meet Your Needs

When you purchase your first home, you’ll need multiple professionals on your side:

  • A good real estate agent to help you find your home and walk you through the purchase process
  • A mortgage professionally to approve and close your loan
  • A NYS-specialized real-estate attorney

Be sure to choose professionals who have worked with others in your shoes in the past. Your mortgage lender should be well-versed in your income bracket and your real estate agent should know your purchase area like the back of their hand.

If you’re ready to start your first home search today, be sure to keep the above tips in mind. And if you need a supportive, Brooklyn-focused brokerage on your team, reach out to Realty Collective today. We’d be honored to support you every step of the way.

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