How much money should you really have for a down payment?

With the price of rent continuing to increase, often a monthly mortgage payment can cost less — and that’s for an apartment that is more renovated and is in your name.

But before you can move into that dream apartment that you actually own, there’s one pretty large obstacle standing in your way: the down payment.

In a recent study from Lending Tree, New York State ranked third in the country among the highest average down payments by amount, behind California and Washington, DC. With apartment listing prices in the millions, New York City skewed New York State’s results into the top three.

So how much do you actually need to have for a downpayment? The short answer is usually you’ll need a downpayment of about 20 to 30 percent, depending on the apartment.

It can be more nuanced based on the actual apartment, the building, what you can afford monthly vs have in cash now, and the bank you are working with for your mortgage.

We break down what you need to know, and how much you need to have in cash, to be ready to purchase your apartment.

What’s the minimum amount I need for a downpayment?

Before getting to the specifics, a good principle to consider is the more money you put down upfront while purchasing your apartment, the less you’ll pay monthly, and vice versus.

But, the less you’re willing or able to put down upfront increases the risk your mortgage lender sees in you. Which in turn means you’ll have to pay a higher interest rate and other potential fees while paying off your mortgage.

So what’s the true minimum you can put down? While in some parts of the country, you might be able to put zero percent down, that won’t be the case here in New York City. Lenders and sellers will turn you away.

FHA loans

If you plan to use a Federal Housing Authority (FHA loan), you could put 3.5 percent of the total cost down. But this means you’ll be limited to buying in FHA-compliant buildings and will likely be forced to purchase in the outer boroughs.

In the 10 to 15 percent-down range, you may find a lender that is open to give you a mortgage, but sellers will often be hesitant to accept an offer with that much financing involved. A downpayment of this size will only seem attractive if there is low interest in the apartment overall.

If you can only put down 10 to 15 percent, focus your buying search on condos. Condos do often have minimum financing requirements, but they are usually less than co-ops. However, condos can also be more expensive to buy, so while the downpayment would only be 10 percent, the amount of ash is more than 10 percent that of a co-op.

If you plan to put down any amount less than 20 percent, you’ll likely also need a Private Mortgage Insurance (PMI) to guarantee the loan in case of default. Having a PMI will increase your total monthly payment.

What’s the standard downpayment for apartments in New York City?

The standard downpayment to buy an apartment in New York City is 20 percent and is often required in most cooperatives. This is the threshold that most sellers expect and will normalize your interest rates with lenders, as they will see you as less risky.

Offering 20 percent down will help increase the likelihood of your offer being accepted.

If you want to increase your odds of having your offer accepted and lower your interest rates further, offering 30 percent down.

If you’re purchasing the apartment as an investment property, rather than a primary residence, 30 percent down is the standard accepted amount. But expect your interest rates on the mortgage to be higher than that of a primary residence mortgage.

Can I make an all-cash offer?

First off, if you have enough money to make an all-cash offer on an apartment in New York City — congratulations! You did a great job-saving.

If you have the cash and don’t want the monthly payment, you can make a 100 percent all-cash offer. Most sellers dream of this, as it speeds up the closing. Your offer will be taken extremely seriously and often may even be accepted at a slightly lower price threshold because the seller knows the offer won’t fall through because of financing concerns.

What other factors determine the size of the downpayment I need?

Unfortunately, how much cash you have saved is not the only factor that determines the size of the downpayment you need. The building and the seller will affect your downpayment.

A co-op apartment building will usually require at least 20 percent down. There are some co-op buildings that are more investor-friendly that require an all-cash offer. Some apartments will also require 30 to 50 percent down. Usually, the listing will indicate if there is a minimum downpayment, so look for this before you go tour the apartment.

If you’re buying in a co-op, the co-op board will review your proposed downpayment, as well as, your debt-to-income ratio.

Even if a building allows your downpayment, that does not mean the seller will accept it. Sellers are attracted to all-cash or non-continent offers because of the likelihood the offer will go through.

In general, offering a 20 percent down payment will get you a good mortgage rate and increase a seller’s desire to accept your offer in most apartments in New York City.

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