With a new year, comes a new chance to makes changes to your lifestyle. If still in the renting game but aspire to homeownership, 2019 could be the year you make the changes that will take you to that goal. The present buyer’s market in NYC predicted to last until the 2020 presidential election. If you hope to cash in on it, start making the changes now that could see you becoming a homeowner by this time next year. That might seem ludicrously optimistic to many New Yorkers, but if the potential is there, it’s well within the realms of possibility. At the very least, picking up these habits of successful home buyers will give you a realistic sense of what homeownership can be. As well as giving an estimate of when you can make it happen.
Table of Contents
Sacrifice a few luxuries
It is pretty obvious, but it deserves underlining. If you can’t make a few sacrifices, then how can you expect to save for that 20% down payment? Sure, an FHA loan can come with as little as 3.5% for the down payment. But these are very inflexible loans, and you’ll have to take out mortgage insurance, which hovers at around 1% of the cost of the loan. Start proving to yourself that you can make the sacrifices necessary to save for that 20%. It is also good practice for showing that you can keep up with your mortgage payments.
Aim to eat out less often, cut the cable bill, revise any ongoing subscriptions, and quit your gym membership. It costs far less to make your meals, and there are plenty of ways you can get a full workout without paying a penny. Don’t just limit this to the small expenses, avoid high costs as well. Is there a cheaper vacation you can find for this summer? Do you have an expensive car that you can live without?
Set up a home savings account
Starting a home savings account is the first concrete step toward homeownership. These accounts designed to provide renters with a tax-advantaged way to save for a down payment. It’s a risk-free way to invest funds, and you can make deposits at any time. Create a plan to make weekly, biweekly, or monthly (whatever’s feasible) deposits. You can even set up the account to automatically deposit a set amount from your salary each month. Within enough time, you can have a tidy amount saved and start to see what your budget is for a home.
Learn about the home buying process and local market
Without knowing the process of buying a home, how can you expect to know what the steps ahead are? What type of property are you interested in? There are condo and co-op apartments, townhouses, and standard one or more bedroom apartments to choose from in NYC. The home buying process differs slightly for each one, so read up on what you can expect ahead. Learn about the real estate agent’s job and how you can choose a good one. Study the local market by keeping up-to-date with market reports and real estate news. Attend open houses to see what’s out there and motivate you to save more. When you can see the road ahead, it becomes a lot easier to follow it.
Do a trial run of homeownership
There’s a lot more to owning a home then just coming up with the 20% down payment. There’ll be monthly mortgage payments, maintenance costs, property taxes, and insurance to pay. Those living in co-op apartments will have a set monthly maintenance fee. Condos come with common monthly charges. Based on your homeownership ambitions, you need to get a rough idea of how much you’ll need to save each month to keep up with payments. For one month, set aside the anticipated amount you’d need to keep up with monthly expenses and an emergency fund. If you can’t live within that budget, you’ll know you need to revise your buying ambitions.
Work to boost your credit score
How high your credit score is will determine to a large extent how much you can qualify for a mortgage and at what interest rate. A lot of things go into determining your credit score, and there are several things you can do to boost it. Pay all your bills on time, pay down your debt rather than shifting it around, and dispute any inaccuracy’s in your credit reports. You should aim for a minimum score of 600, but getting it to 700 and above will ensure a far better interest rate. Improving your credit score will also teach you good financial habits, which are all part of what it takes to buy and maintain a home.
Saving Tips Buy Your Slice of NYC Real Estate
After about a year of living in New York and paying an excessive amount of rent each month, my husband and I began searching for an apartment to buy. You’re probably thinking, “How in the world could we possibly afford to ‘buy’ a piece of Manhattan Real Estate?” Or, “Doesn’t everyone rent in New York City?” Well, many people do rent, but believe it or not, many people own apartments, too.
Since we had sold our house in Atlanta (where we had lived previously), we decided to take the profit from that house and put it toward a much smaller (albeit more expensive) real estate purchase in NYC. When we started our quest, however, we soon realized that we needed to save more money since most co-ops require reserve funds (money left in your bank account after you purchase.) And so, we did just that –– we saved.
Now, saving thousands, or pennies, for that matter, is no easy task while living in NYC. Money seems to fly out of your pockets every time you step beyond your front door, and as a New Yorker, you’re constantly surrounded by the temptation to spend. But, with your eyes on the prize –– an invaluable slice of New York to call your own –– saving is possible. Here’s how.
Create a budget
Once you’ve made the decision that you want to buy rather than rent, sit down and make a detailed spreadsheet with your expenses and start slashing. Do you need your apartment cleaned weekly? And since you’re looking to lose a few pounds, trading the daily bagel with cream cheese for an apple is a good idea, anyhow. You’ll be surprised how many items aren’t necessities or can, be replaced with cheaper options, and you’ll discover exactly how much money you can put in the nest egg each month.
Move to a smaller, less expensive apartment for two years. This option didn’t work for us because we were in a two-year lease and intended to buy at the end of the term. But if you do not live in a rent-stabilized apartment, consider moving for two years and putting the cash you save each month toward your dream apartment.
Cut your bar tab
Cocktails in New York are expensive, so forget the pricey bar tabs and hit happy hours, instead. With $4 well drinks available in many watering holes every day, there’s no need to sip the $14 cocktail. Some spots even have food specials, so you can nibble while you imbibe. It brings me to #4.
Spend less on food
Shop at Trader Joe’s. Cook more, and eat out less. Take your lunch to work, or find the lunch specials and the $1 slices.
Reduce your utility bills
Drop overpriced cable and use Apple TV, Netflix, and Amazon Prime. Use lamps only when you must. Read more, and watch less TV. And if you have a landline, get rid of it.
Ride the subway
Reserve cabs for late nights and when you’re sick or exhausted. Otherwise, take public transit –– everywhere. Or, go the cheaper route and walk.
From walking the streets and seeing the sights to free museum days and riding the Staten Island Ferry, even if you’re penniless, you’ll never come up short on fun, free things to do in the Big Apple.
Drop the gym membership
Use Central Park or one of the many other beautiful outdoor spaces around town. If the weather doesn’t cooperate with your workout schedule, become a member of the NYC Department of Parks and Recreation for just $150 per year. You’ll have access to more than 50 centers, not to mention free exercise classes throughout the city.
New Yorkers live on coffee, but you can save a bundle if you brew your own. At approximately $5 a pop, if you do the math, you can see this is a significant saving each month.
Be committed to saving
More than anything, let “SAVE” be part of your mantra for the next two years. It’s not forever, and a few sacrifices here and there will be well worth it when you score the keys to your very own New York pad.