With all the activity that’s been going on in the NYC sales market these days, many of you out there are pondering one question – should I buy? Well, I believe it depends on the result of the following equation:
current financial picture + future plans + inventory
I’ll explain each of these factors below.
Your Current Financial Picture
If any of the above factors were weighted (yes, I’m a wee bit of a math geek), then your current financial picture would be given the most weight. Because the sales inventory in New York City primarily consists of co-ops and condos, your financial information is scrutinized much more so than in other sales markets. Here are the questions you need to ask yourself:
- What’s my current income?
- Most co-ops look for a debt to income ratio of at least 25%, meaning, if you have an annual income of $120,000, then you should strive to keep your monthly mortgage and maintenance payments at or under $2500 per month.
- What’s my personal liquidity?
- How much of a down payment can you provide? 10%? 20%? 25%? 30%?
- Many condos may only require a 10% down payment, but it’s still tough these days to get 90% financing unless you have pretty stellar credit. Most co-ops require that buyers put down, at a minimum, 20% to 25% of the purchase price. But the upside is that prices for co-ops tend to be lower than condos.
- However, co-ops also require that you have liquid assets left over AFTER your down payment. How much? It varies from building to building – anywhere from 1 to 2 years worth of mortgage and maintenance to liquid assets equivalent to the purchase price.
- How long have you been employed?
- The longer you’ve been working, the better!
- How’s my credit?
- Review your credit history to make sure you don’t have any serious blips. If you know you have some issues, speak to a credit advisor to figure out how to clean things up.
- Do you qualify for a mortgage? If so, how much?
- If you haven’t spoken to a mortgage broker to get pre-approved or pre-qualified for a loan, then stop, do not pass go. Talk to a mortgage brokernow and figure out how much you can afford.
The next most important thing to ponder is what your future plans are likely to be. Home ownership certainly has many benefits, but if it’s highly likely that you will need to move within a few years, buying may not make sense. To illustrate, check out this rent vs. buy calculator from the New York Times – NY Times Buy vs. Rent Calculator.
Another question to ask yourself – how likely is your income to remain steady or increase? If you feel confident that your income is going to remain the same or increase over the next few years, then you have a green light. However, if you’re contemplating a major change which could cause your income to decrease significantly, you may need to rethink whether or not having a mortgage will work for you, or if you need the flexibility of being a renter.
In my opinion, finding the right apartment isn’t necessarily about “timing the market.” Few people, if any, can time the market (but if you’re actually gifted at this, then we may need to talk about investing together…). The most important thing to consider is this: is there anything out there that is within your desired price range that fits what you want?
If the inventory you like is out there AND your financial picture looks good AND you feel relatively secure about your future, then GO FOR IT! And be sure to reach out to me so I can help you 😉
Nikki R. Thomas
Licensed Associate Real Estate Broker
The Corcoran Group