A large down payment may be the one thing preventing you from purchasing property in New York City. Read on to learn how alternative financing solutions may help you avoid this obstacle.
Whether you are making a purchase for business or pleasure, it can be stressful to purchase real estate in New York City. Even though there are aggregators like StreetEasy, it may be difficult to find the best building and unit for you. When you do find a particular unit, you always need to move quickly in order to lock in your interest. And when you are moving quickly, you often need to comply with obscure terms and conditions in order to make your purchase official.
There is a lot to take in. Along with this, there are time pressures that add a layer of stress on top of the entire experience.
But having said this, one of the most stressful parts of purchasing real estate in New York City often centers on the financial aspects of purchasing your property. Specifically, some purchasers can get sticker shock over a property’s required down payment. Even though a buyer may be able to afford the property, he or she may not have the cash on hand to make this payment. This is especially true in a city like New York, where a high cost of living imposes cash constraints on nearly everyone.
Ultimately, you will want to know your options if you purchasing property that contains a large down payment requirement. By doing your homework, you will be in a much better position to preserve your liquidity and actually purchase the property that you love. That said, we encourage you to look into low down payment jumbo loans, as they can ease a high down payment requirement for a particular property.
Navigating Down Payment Requirements
To start, it is important to understand the varying scale of down payments for property in New York City. StreetEasy has compiled a helpful guide describing the common types of down payments in the city. Ultimately, the rule of thumb is that the less money that you put down in your down payment, the more risk that lenders will see in you, thus requiring a higher interest rate from you.
First, the bad news. There is virtually no chance of purchasing New York City property without a down payment. Both lenders and sellers will always refuse this type of arrangement—no matter how convincing you think your argument may be. Because of this, you shouldn’t rest any hopes on obtaining 100 percent financing for your purchase. It simply isn’t going to happen.
On the opposite side, a 100 percent down payment—essentially consummating the entire purchase with cash—is possible, but quite rare. In many cases, a buyer does not have the cash available to purchase the property in one fell swoop. Assuming this is a possibility, the buyer’s offer will be taken extremely seriously. But that said, there is a separate question of whether the buyer should limit their liquidity by purchasing their property in this manner. In some circumstances, this is the wrong move.
Ultimately, StreetEasy states that the most common down payment is from 10 percent to 30 percent. In fact, many purchasers in New York City assume that it takes a 20 percent down payment to buy an apartment. This 20 percent rate may be true for co-op buildings, but it isn’t necessarily true for other buildings. As with anything, this requires you to complete your own research and read the fine print.
If you are seeking financing to purchase your new property, you may naturally think of going to a bank. Banks, however, may have even larger down payment requirements. For a large loan (say, $3 million and higher), banks will frequently request 30 percent down—or even more. This sort of down payment makes property purchases cost prohibitive for many New Yorkers. In other words, while New Yorkers may be able to afford their purchase, cash flow issues and other restrictions may prevent them from putting forth a substantial down payment.
All is not lost, however. In fact, there are solutions that allow buyers to avoid some of those high down payments when purchasing New York City real estate. Third-party organizations like Bank of England Mortgage work with creditworthy borrowers to navigate around some of these steep down payments. Specifically, most banks consider these to be “jumbo loans” and they can be an attractive option to purchase your new home. Some of these loans let borrowers put as little as 5 percent down when purchasing their new home. This can be a godsend if a large down payment is preventing you from making a purchase.
For instance, Bank of England Mortgage offers several low down payment solutions to creditworthy individuals who do not have a 20 percent down payment saved or who want to preserve their liquidity. The company offers loans of up to $2 million with 5 percent down and a 740 FICO score (primary or secondary homes). If you need additional cash for a larger down payment, Bank of England Mortgage also provides loans of up to $3 million with 10 percent down and a 700 FICO score. No mortgage insurance is required to participate in either program and I-4 family homes and condos are permitted. If you are self-employed, there’s no need to worry. You can simply use bank statement deposits to qualify with as little as 10 percent down. Both programs work for condos, townhomes, and two and four unit properties.
Bank of England Mortgage is just one service provider that can offer you financing throughout this process. Ultimately, however, organizations like Bank of England Mortgage may be more attractive options if a particular down payment seems too substantial. Compared to larger banks, Bank of England Mortgage offers lower payment structures for bigger loans, so it is in your interest to at least complete some due diligence on this opportunity. A low down payment jumbo loan may be your best asset going forward.
Attractive Financing Options
Many New Yorkers agree that it is not easy to save cash while living in the Big Apple. While the average salary may be higher than in other cities throughout the country, the cost of living is extremely high. Everything from food to transportation is expensive, and these fixed costs will only rise from here.
Because of this, a good number of New Yorkers face a dilemma. While they may have good (or even great) credit and a high income, onerous down payment requirements may prevent an individual or family from transitioning from renting to owning. In other words, the purchaser may have to suffer significant opportunity costs simply because they cannot afford a hefty down payment.
Luckily, it doesn't have to be this way. Working with an organization like Bank of England Mortgage, purchasers can navigate around hefty down payments for their next home. And even if a purchaser does have the cash to afford their down payment, jumbo loans can help the purchaser preserve some valuable liquidity. In effect, jumbo loans provide the opportunity and flexibility to purchase property on your own terms.
If you would like to learn more about Bank of England Mortgage and the financing options it provides to New Yorkers, feel free to visit its website by clicking here. Whether you choose to work with Bank of England Mortgage or some other organization, we encourage you to check out low down payment jumbo loans.