6 Tips for Millennials on Buying a Home in New York

If you are in your mid-30s and you still haven't bought a home, don't fret. Renting is the norm among New York Millennials.

Millennials are buying later in life than previous generations.

Part of the reason for the delay deals with the wage stagnation they experienced during the Great Recession as well as the high price of student loan debt.

But that's only part of the story.

Unlike generations before, many Millennials aren't interested in classic signs of growth like homeownership.

They would rather spend money at restaurants, travel abroad, or just be able to work jobs they find more fulfilling.

Millennials Buying Homes in New York

• While fewer millennials can afford to buy a home between the ages of 25 and 40 than their Boomer parents, millennials have become the largest group of homebuyers.
• Reasons millennials have started to buy is because they're raising families, caring for aging parents, and just looking to save money.
• Purchasing real estate in New York may require a hard look at your fiscal health and intelligent financial planning.
• Building credit and saving money are two ways millennials can prepare themselves to buy.
• Understanding the different types of properties out there and the process will only help you be a better buyer.

Reasons Why Millennials are Starting to Buy

Although many Millennials rent with roommates and enjoy a single life in the big city, many older Millennials have started their own families and decided to buy.

Generation Y, as numerous as the Baby Boomer Generation, is now becoming its own. According to the National Association of REALTORS, they have become the largest group of homebuyers in the US, making up roughly a third of all buyers.

More than a third of Millennials looking to buy have young children and desire to buy a home to call their own, as well as a change in their family situation.

The top reason for Millennials to purchase a multi-generational home is to care for aging parents. The second top reason was to save money.

Taking A Look At Your Finances

New York is expensive. It's one of the most costly cities in the world.

If you want to buy a home here, you need a budget matching the pricing here. It's also where it's far better to rent than buy.

Before you look into buying, you need to get a good idea of whether or not it's even possible.

Buying a home is not a must, but it can have its benefits.

There are possible tax benefits for homeowners and opportunities to build your credit by paying your mortgage on time faithfully.

Furthermore, purchasing real estate means making an investment that can accrue value over time.

Likewise, it can be detrimental to your financial health if you are not ready to step into a more potentially fiscally demanding role.

That's why it's essential to weigh the pros and cons and assess your buying power before taking the first step.

What is your income level?

Whip out a calculator, look at your savings account, and look at your cost of living.

Compare it to a typical mortgage in the area you want to buy in.

Can you afford a home with a mortgage, PMI, and taxes here? If the numbers barely scrape by, staying litter is better.

Similarly, buying in New York City is not wise if your income is volatile.

You never know what may happen, and being unable to pay a mortgage will lead to far worse things than being unable to pay rent.

The median salary to afford a home in New York City is $114,000 right now.

It might be even higher next year. Buying is not for you if you are making a modest income.

Use PropertyNest: Mortgage Income Calculator

Can family help out financially?

Even though Millennials are reaching their thirties, a large portion still rely on parental income to make ends meet.

It's not necessarily Millennials. Millennials' job economy made it difficult for many industries to be livable.

If you currently rely on your parents to pay the bills, you probably should wait until you're more financially stable.

If you still want to try homeownership, then it's wise to talk to your parents about cosigning on the loan. Otherwise, getting a home loan probably won't work out.

Isn't an inheritance you can draw from?

Many Millennials are banking on their inheritance to afford a home, but that's not always that'sht idea.

Most Millennials vastly overestimate how much they will receive in an inheritance—often by a long shot!

While most experts estimate the wealth of the Baby Boomer Generation to be about 30 trillion, the peak age range for inheritance won't come until awon't60bu years of age for Millennials.

Furthermore, while the Boomers are alive, they still have what they have to do. That means the usage of those very funds.

If you have decided to buy a home, you need to save up some money and ignore the potential inheritance you think you'll receive.

Otyou'lle, you may be disappointed when it's time to qualiit'sorfy f a mortgage.

Do you have an IRA or other retirement account you can draw from?

Many people don't start putting money into retirement until they reach their 30s, so there may not be a lot of equity in your retirement accounts unless you have started putting it away aggressively.

IRA and IRA Roth accounts both allow you to borrow from the account, for which you have 60 days to pay back the money to your account to avoid taxes or penalties.

You can borrow from your 401k but expect to pay taxes and high fees.

What is your credit like?

If you thought renting was tough on credit, wait until you try to get a home loan in New York City.

If you are below a 700 score, qualifying for a loan won't be impossible, but it will come with consequences.

For one, you will pay more interest to your creditor than someone with a good or excellent credit score.

That's potentially thousands of dollars over the life of a mortgage.

Upping your credit score is an excellent way to prepare for a mortgage. Get our expert tips on boosting your score from How to Improve Your Credit Score.

Look into government-sponsored and non-profit programs.you'd

If you are a first-time buyer or a lower-income individual, you may be able to get a down payment loan to help you buy your first home sooner.York’sYork’s HUD has multiple loan programs with affordable terms, reasonable payment plans, and more just for this purpose.

NewCity’s HUD programs also include a first homebuyer’s tutorial and class to help you learn what to expect when you pay for your first home in New York City.

Speak with a real estate professional.

Navigating New York City real estate purchases isn’t easy.

It would be best to talk to someone who has been through the wringer several times, such as a realtor or banker.

They often tell you what to expect, what to afford, and more.

Start Saving

Though you might be able to swing buying a place with no money, it’s not the norm unless you have a VA loan.

To get the home you want (and maintain some security, too), you need to start saving up money...and fast.

Consider Taking A Second Job Or Downsizing

There are ways to qualify for 0 or a small percentage down, but these are not the norm.

Most mortgage companies will want tens of thousands of dollars in down payments before they approve you for a New York City mortgage.

Most co-ops will also want to see a lot of liquidity. Same with condos.

Cash is king, and you need a lot of it in your bank.

Though taking a second job and tightening your belt are the two most common ways to save money, any method you use is one you should consider.

Liquid funds will only help you in your attempt to buy a home in New York City.

The sooner you start saving, the better. That cash can make a difference when getting approved for a loan OR the co-op of your dreams.

Overcoming Millennial Money Problems

The easiest way to ensure you get a good shot at homeownership is to solve classic Millennial problems that prevent budgets from being real estate-frieHere'sHere’s what you need to know about the income barriers and how you can potentially solve them:

Overwhelming Student Debt

Studies show that Millennials have the highest levels of student loan debt out of all generations in American history.

On average, a typical 10-year, $25,000 student loan will require a $280 monthly payment. Your loans can easily equal a monthly mortgage payment if you have a doctorate or a master’s degree.

Unlike any other type of debt, student loans can’t be discharged through bankruptcy.

The only real option with these loans is to pay them off or refinance them.

Tackling your loans before getting a mortgage is vital. I don't think it’s possible that I won’t be able to qualify for a mortgage!

Low Incomes

Though this is not the case across the board, many Millennials struggle with getting a mortgage due to income levels.

Studies revealed that Millennials earn far less than their parents at the same age, adjusted for inflation.

Thankfully, there are several ways to (at least partially) even out the playing field:

• Take Up A Second Job. This is not ideal, but it can help you reach the minimum income to qualify for a mortgage.
• Switch Jobs. Studies show it’s usually more profitable to hunt for jobs every two to three years than to stay in a position in hopes of getting a promotion. This is because new employers will be more willing to hire you at a higher wage than you’d receive at a rise. So, dust off that CV and start applying.
• Open A Side Business. Side businesses, particularly turnkey operations, tend to give people the ability to earn a passive (or semi-passive) income.

High Healthcare Costs

The price of healthcare is absurdly high, no matter how old you are.

With Millennial households already feeling the income crunch, it can be hard to mitigate this ultra-pricey issue.

Thankfully, there are ways to help curb spending:

• Seek Out A Benefits-Rich Job. If you can find an employer that provides discount health insurance, by all means, apply. This is a simple way to ensure you get rid of a significant bill.
• Work A Payment Plan Out. If you already incurred bills from a medical visit, call the hospital or doctor. Ask them about good faith payment plans, charity care, and other options. You might be able to work things out.
• Revisit Old Bills. Please carefully review your old medical bills since many accounts have serious (and pricey) errors. Call your insurer if you notice something "off" about your bill. They may be able to fight the billing error on your behalf.

Know What You're Buying

Apartments, condos, co-ops, homes, oh my! You can buy a little everything in NYC, can't you?

Well, here's what you need to know about each and why they may or may not work for you.

Houses and Townhomes

If you can find a house or multi-family house outside of Manhattan that you can afford, it's a good idea to consider it.

Houses are way more spacious than most other options, and multi-families can afford you passive income.

Read more on How to Buy an Investment Property in New York.

Loans offer less red tape, getting approval is more accessible, and you might even be able to help pay your bills.

These can be a fantastic way to create lasting equity and a source of income.

Most houses in the five boroughs are out of reach for first-time renters.

You also will be entirely responsible for maintenance and repairs, so if something breaks, it will be an out-of-pocket expense.

Condos

Condos are often the most attractive choice for homebuyers. They are more affordable than townhouses or single-family homes and usually tend to have amenities offered. Also, there aren't too many rules and regulations as with co-ops.

Even if they usually cost less than a house, this is still New York City and prices for some condos can be eye-popping. The good news is that if you need to rent or renovate your unit, there will not be too many hurdles.

Co-ops

Co-op purchases don't make you a homeowner per se, but they give you ownership over a unit and shares of the building.

You get a lease that lets you occupy that unit thanks to owning shares in the company-owned building.

Co-ops have maintenance bills much like rent, but they also come with more amenities.

Price-wise, they are often much cheaper than comparable condo apartments, making a great first home for many.

The problem with co-ops is that the application process is often intense, sometimes intrusive, and can be downright frustrating. Co-ops also tend to have stricter rules about what you can do with your unit.

You may also be in a co-op with frequent assessments, meaning your monthly bills may increase.

That being said, because the prices are much lower, co-ops are a great place to start if you can pass through the rigorous board application process.

Lofts

Artists love lofts, which is why they are highly demanded in real estate.

These open spaces are often converted from industrial buildings to live-work spaces for lone artists or collectives.

Because of the unique multifunctionality of many lofts, you may be able to write them off as business expenses if you work in them, too.

They are more open to unique people and can be more affordable.

That being said, many lofts are illegal. Make sure you buy one you can live in before you plunk down the money.

Hiring a reasonable real estate attorney can help you avoid the pitfalls that may land you in the red.

Learn The Process

Each type of property will have its buying process. Here's a quick run-through:

Basic Buying Notes

• Houses. Houses are expensive but are the easiest to buy. You can get a mortgage, will need an inspection, a lawyer present, and will need to cover closing costs. You don't have to be approved by a board to get full reign over your place. It's simple.
• Townhomes and Condos. You can get a mortgage for these reasonably easily, but buying can be more difficult. You may need board approval before you buy it. You also may not need to deal with inspections or repairs since the condo association covers them. You will have rules to follow, but most are easy to deal with. That said, you still get full reign over your space as you own it.
• Co-Ops. These are the cheapest on the market, but the application process makes them very difficult. They have incredibly intrusive applications that involve issues like liquid asset minimums, live interviews, and a loan lined up if you can't afford cash. The boards can make your life miserable, as can all the rules. You will also be responsible for monthly maintenance bills. You don't own a co-op, so technically, you can be evicted.
• Lofts. Lofts are often treated like apartments or condos when it comes to the buying process. Some are also treated like industrial purchases. A building inspection, as is live-work zoning, is necessary if you want to stay legal.

No matter what kind of property you want to buy, you need a real estate agent and a lawyer to look things over for you. HIt'siring an experienced one to help you out is a good idea!

Beware Of Scammers

Though rare, real estate sales scams have happened in the past. It's best to use common sense here.

If a listing looks too good to be true, it probably is.

If it'sa licensed realtor is not selling it, it probably is a scam. Run if they balk when you tell them you need a lawyer to look it over before you hand money to them.

Above all, never buy a place you have never seen in person.

Know Your Neighborhood

Like any other part of the United States, buying a home in New York City means you need to know the area you're living in.

Is it on the "up and up?"

Is it already established, like the Lower East Side? Or is it an area with a high crime rate? You need to know these things before you move there!

Look At Daily Life Details

Your neighborhood will make or break your stay; the devil's all in the details.

Do you see high crime rates? Gang graffiti? Bad schools? Nearby metro stations? Grocery stores? Good restaurants?

These things matter and will often reflect in the price of your home.

If you're looking for a long-term stay, it's worth pointing out that many of these things may change as the years pass.

Many "bad neighborhoods" are now desirable to Millennial professionals.

Even so, you might want to still look for the best value.

Inspect The Home

A home inspection is a must if you want to buy a house.

Repairs are expensive, and slick sellers may try to hide them from you until it's too late.

A good inspector can spot them and give you a better negotiating platform when you make an offer.

Be Realistic

Renting in New York City is often cheaper than owning.

If you want to own your place, there is a good chance you will have to downsize.

Is that something you want to do? Will you want to grow larger again if you have kids?

You might want to think about that before you make the move.

If you are okay with living in a smaller space in exchange for more equity or control, then you're a good match for homeownership