Behold the Era of Huge Down Payments

Everyone knows that housing is unaffordable in New York City, but just how unaffordable is it?  By most estimates, your housing is affordable if less than one third of your paycheck goes to rent or mortgage payments.  The advantages of homeownership are obvious; you spend a hefty portion of your paycheck on housing each month, but at least you build equity in an asset that your descendants can inherit.  Of course, to get a monthly mortgage payment low enough that lenders are sure that you will be able to keep paying it, you need an affordable interest rate, a sizable down payment, or both.  As home values and interest rates grow higher, it means that homebuyers must place enormous down payments in order to qualify for mortgage loans.  This effect is especially noticeable in notoriously expensive housing markets like New York.  For help strategizing about buying a house or condominium in New York now that housing is even more expensive than ever, contact a Bronx real estate attorney.

How Does Anyone Come Up With a $600K Down Payment?

For as long as you have been in the workforce, mortgage lenders have assumed that you will put a 20 percent down payment on the purchase of a house and finance the rest.  The exceptions were programs designed for first-time homebuyers, such as FHA mortgage and countywide affordable homeownership programs.  Putting together an amount of cash equal to 20 percent of the purchase price of a house is no simple task, unless you are selling one house to buy another one.

In today’s housing market, a 20 percent down payment will leave you with a monthly mortgage payment that will take up most of your paycheck, a scenario so risky that most lenders will refuse to lend unless you increase your down payment.  According to recent data from Zillow, 35 percent is the down payment that mortgage lenders in most U.S. housing markets want to see.  Of course, New York City is not like most housing markets.  Here, the average amount that you must put down so you can get a mortgage payment that doesn’t take up more than a third of your income is 60 percent.  Given that most real estate properties in New York City cost upwards of a million dollars, that is a $600,000 down payment.  If it is any consolation, the most expensive cities in California require down payments in excess of 70 percent, meaning that most people’s down payments are in the seven figures.

To afford this, you either need the proceeds of the sale of your previous house, or else a large lump sum of cash, such as an inheritance or several relatives giving you cash gifts that fall just below the annual gift tax exclusion amount.  Preferably, you should have both.  A real estate lawyer can help you reduce the cost of buying or selling a house so that you can free up funds for the down payment.

Schedule a Confidential Consultation With a Bronx Real Estate Attorney

A real estate lawyer can help you find a way to afford a mortgage loan in today’s market.  Contact Cavallo & Cavallo in the Bronx, New York to set up a consultation.

Source:

finance.yahoo.com/news/goodbye-20-down-payment-zillow-171144192.html