Jun 12, 2009

How Much Apartment Can You Afford?

Understanding The Related Costs of Apartment Buying

You'll need to think about more than a mortgage payment to determine if you can afford an apartment in Manhattan. To assure you are purchasing a home within the confines of your budget, you must consider down payment requirements, closing costs, taxes, carrying charges, and yearly maintenance requirements as well.

How much can you afford?

First consult with a mortgage broker or banker to determine how much of a mortgage you qualify for. Calculate the estimated mortgage payment plus monthly maintenance (coop), common charges and real estate taxes (condo).

Several formulas exist to help determine how much a lender will allow a consumer to borrow. One of the more accurate formulas is a front- and back-end ratio. It states that the buyer can afford as much as 28 percent of his or her gross-monthly income toward the monthly mortgage payment, assuming that the consumer's other debt payments (credit cards, car loans, student loans, etc...) are less than or equal to 8 percent of his or her gross-monthly income.

Most NYC coops have stricter financial requirements than most lenders. Most coops use a 25% debt to income ratio formula. Many coops will only allow a maximum of 75% financing although some will allow 80%. Coops may also require liquid assets available after the closing to cover 2 years worth of maintenance or 1 year of mortgage and maintenance. Every building varies and uses their own formula.

While condos will allow 90% financing many lenders today will only finance 85% (LTV) loan to value. A minimum 15% or 20% down payment may be required. Before you start looking for an apartment in Manhattan you should be pre-approved and qualified by a lender.

Understanding your financing needs before you search for a new home will help you move ahead quickly and confidently when you find the right home.


4 Responses to " How Much Apartment Can You Afford? "
  1. JPM said...
    June 12, 2009

    Mitchell, I like your blog. Thanks. I have a question about closing costs. On new developments, purchasers pay into the capital fund. But if a capital fund contribution is required on a resale, who pays, buyer or seller?

  2. Mitchell Hall said...
    June 12, 2009

    Hi JPM, Thanks for reading my blog. Most likely the purchaser pays into a capital fund. It would be included in the offering plan or amendments to the plan or in the purchase application. Below is the url for a post about closing costs.


    Or type closing costs in the google "search this blog" bar.

  3. Anonymous said...
    August 02, 2009

    Love your blog. I'm looking at both condos and coops in Manhattan, and wondering about the 28% calculation. Should I look to spend 28% or less including or excluding taxes and condo/coop fees?

  4. Mitchell Hall said...
    August 06, 2009

    Hi Anonymous, In a coop you should try to keep it 25% or less. The maintenance is included in housing cost. In most condos as long as you have financing and a down payment it doesn't matter that much although banks have become stricter and may require a bigger down payment. If you're not currently working with a broker, I would be more than happy to help you find and secure an apartment in Manhattan.

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This blog site is designed and published as a consumer service by local real estate broker to help Manhattan, New York City buyers, sellers and renters make informed real estate decisions. This site and its feeds are owned and operated by Mitchell J Hall, a NY State licensed real estate associate broker associated with The Corcoran Group and member of the Real Estate Board of New York.

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