If your renting days are over and now you’re looking to own a place in NYC, we’ve got all your questions answered. This is what you need to know about buying a starter apartment in NYC right now.
What is a starter home?
A starter home is a house that is the first property a person or family can afford to buy. Essentially it is an entry-level property for first-time homebuyers. These homes are usually smaller, costing on average $150,000 to $250,000 (unfortunately, not in NYC) and can be bought with their savings and mortgage.
The concept of a starter home is for buyers to live there a few years before purchasing a larger, more expensive “forever home.”
Starter homes in NYC
Starter homes are usually purchased by those who have reached a certain point in their lives where they feel financially stable enough to transition from renting to buying. The prices of starter homes will vary depending on the city and state you’re looking in.
According to Statista, New York averaged around $526 per one square foot of property in 2018. The median price of homes in NYC is $637,250 in comparison to only $230,100 nationwide. However, the prices of homes also range depending on which neighborhood and borough you are looking at. For example, Manhattan is one of the most expensive places to live along with areas of Brooklyn where houses can cost over one million dollars.
First-time purchase: house vs. apartment
After you’ve decided to take the next step and purchase your own space in New York City, which is better: a house or an apartment? What are the differences and how much do they each cost? We’re here to answer all your questions so you can decide which space is better for you!
Apartments in NYC
There are two different types of apartments you can purchase in New York City: a condo or co-op. A condo is when you own an entire apartment unit and sometimes part of the building’s common areas. Condo owners can easily rent or sell their home and are great for those who want a short-term house before moving to a larger space. However, they are typically more expensive than a co-op and have higher closing costs.
A co-op apartment on the other hand, is when you purchase shares of a corporation that owns the building. When you purchase a co-op, you receive a proprietary lease rather than a deed that allows you to stay in a specific apartment in the co-op building.
Additionally, there are many subletting restrictions so a co-op is better for those looking to stay long term. Purchasing a co-op apartment also has a more extensive and stricter application process. It includes a co-op board approval process that includes both an application and interview in order to get buyer’s approval. However, co-ops are much cheaper than condos and have lower closing costs.
Houses in NYC
The types of houses available in NYC include townhouses, fully detached homes, and lofts. A townhouse is usually a three or four story building that shares adjoining walls with other buildings on either side. Each townhouse can either be a single family home or divided up into an apartment per floor. They are usually narrower than traditional homes but have backyards and a rooftop space. Townhouses tend to be on the pricier side compared to condos and co-ops.
A fully detached home is more like the traditional house you would think of. They are wider and have a lot more space compared to a townhouse. Many times they also come with a large outdoor space. However, it is more difficult to find these types of houses in Manhattan and can be found mostly in neighborhoods on the edges of the borough.
Lofts are spaces that were once manufacturing or industrial buildings that have been converted into a living space. They usually have large open spaces, high ceilings, and big windows. While there are many new “lofts” that have been created to imitate the look of the originals, most of the original ones can be found in certain neighborhoods: Tribeca, Soho, and Williansburg.
Where to find affordable starter homes in NYC
If you’re buying a house in NYC for the first time, it can be difficult to navigate how to look for one and which ones fit your budget. So how much does it cost to buy an apartment in New York? What about a townhouse or fully detached home?
Out of all your home buying options, a co-op apartment would be the most affordable, with HDFCs often priced below market rate. However, whether you choose a condo, co-op, townhouse, or house, the asking price is largely determined by borough and neighborhood. For instance, the median list price per square foot in The Bronx is $274 but is $759 in Brooklyn. Manhattan’s is $1,801, Queens $497, and Staten Island $371.
It is important to first determine your purchasing budget and what types of mortgage you could qualify for. This could help you figure out what type of home you want to purchase. Consider talking to or working with a mortgage broker to help you out with this! You can then research neighborhoods and boroughs to determine what kind of space and area fits you best as well as figure out what you are looking for in an apartment building.
Once you have figured out your budget and narrowed down various neighborhood options, you can easily search and filter through home listings online to look at all your options!
Where to find affordable starter homes
Living in New York City can be very expensive and the word “affordable” can take on a different meaning here as well. Co-ops are a more affordable option to condo developments, and
Zero percent interest rate
Your starter home will most likely include a mortgage. A mortgage is a promise to pay your lender (the mortgagee) a certain amount for the right to borrow a fixed amount of money to buy, in this case, a home. You (the mortgagor) agree to pay this money back, with interest, over a set period of time.
According to Bank Rate, the APR (annual percentage rate) on a mortgage reflects the interest rate as well as other borrowing costs, such as broker fees, discount points, private mortgage insurance, and some closing costs. In response to the COVID 19 pandemic outbreak, the US Central Bank lowered its interest rate to 0%. The Fed’s interest rate often moves in the same direction as the traditional 30yr fixed mortgage, so there might be more opportunities in the short term to get a better mortgage for your starter home.