Let’s welcome Nikki R. Thomas, Licensed Associate Real Estate Broker and New York City Blogger! I’ve been following her blog, Nikki in NYC for years, so it’s super exciting to have her guest post for Mary in Manhattan. There’s no one better to help you navigate the insane NYC real estate market.

With average prices hovering around the $1 million mark in Manhattan and $600K in Brooklyn, owning a home in New York City can seem like a daunting (if not impossible) task.

It certainly does take a LOT more to make homeownership happen here versus other cities around the U.S., but it might not be as herculean of an effort as you might think. Here’s why.

Not Every Building Requires 20% Down

You’ve probably heard this a number of times – 20% is the gold standard when it comes to purchasing your first home. And in most parts of Manhattan and lots of areas of Brooklyn, that’s indeed the case.

But there are many co-ops in Brooklyn, Queens and the Bronx (and even in Upper Manhattan) that will permit you to do 10% down.

Also, the vast majority of condos will let you do 10% down. The reason why it’s often so difficult to do it is because of competition. If your competitors can do 20% down, then you might look like a weaker buyer. But in an area where competition for listings is light, 10% is feasible as long as the seller is okay with it.

Single family homes actually don’t even have a minimum down payment requirement – it’s all about 1) what the seller is comfortable with; 2) what your competition for the property looks like and 3) what you can get approved for from lenders.

Finally, while there aren’t a lot of them out there, unbeknownst to many buyers, some condos in the city are actually FHA approved, which means you might be able to do a down payment as low as 3.5%! You can learn more about FHA loans here. Again – don’t get too excited about this proposition as they’re rare birds. But it’s still good to know!

The main caveats about putting 10% down are 1) you will have to pay an extra monthly fee known as “private mortgage insurance” and 2) your monthly mortgage payment will be higher. So be sure to factor in these extra costs when trying to figure out if putting 10% actually makes sense for you. If it still works with your monthly budget, then go for it!  

Yes, You CAN Get a Mortgage with Student Loan Debt

Believe it or not, banks understand that lots of millennials have student loan debt, so having it doesn’t nix you from being able to get a loan. Unless you’re really delinquent with your loans or carrying a balance that’s way too high for your income, your student loan debt just determines the size of the loan you can qualify for.

Banks look at two ratios when determining how much you can borrow – the front end ratio (housing debt) and the back end ratio (housing debt + other debt like student loans). As long as you meet a bank’s requirements for those two factors, you’ll be able to get a loan.

And yes, buildings in the city (even co-ops!) also understand the student loan debt predicament. They look at the total picture – what’s your housing debt to income ratio? And how does that compare to your overall debt picture? If your monthly payments are well balanced against your income and you have healthy savings, then you’re probably still a solid candidate.

Banks Have Special Programs Geared Specifically Towards First Time Home Buyers

If you’re a first time buyer, banks can offer things like special interest rates and more flexible lending standards for you. Many are also offering perks like closing credits – some as much as $7500. That’s huge if you’re talking about a purchase under $700,000!

So now you see that with the right planning and bit of extra knowledge, homeownership might not be as far off as you think!

If this makes you want to re-think whether or not homeownership might be for you, then I encourage you to download my free guide to see if you’re ready to take the next steps to become a homeowner!

–Nikki Thomas