Types of Mortgages
It's a pretty common misconception that there are only one or two options for choosing a mortgage. In fact, there are hundreds! Not every loan will fit every buyer, but you do probably have more options than you think—even if your credit isn't perfect or you don't have a huge down payment saved up. Here are a few of the most common types of mortgages used today.
Conventional mortgage
When you think of a "typical mortgage", this is probably the one you're thinking of. Buyers who use a conventional mortgage typically have great credit, fairly high income, and a 20% down payment.
VA loan
The VA loan is available to most active, retired, and veteran military service members, and allows these service people to purchase homes with as little as a 0% down payment. A funding fee may apply, however.
Government loans
The US government, the New York state government, and even local city government provide additional loan options for first-time buyers, low-income buyers, and buyers with poor credit. These include loans such as the FHA Loan, the USDA Rural Loan, and several State of New York Mortgage Agency (SONYMA) loans.
What Do Mortgages Include?
There are four main components to a mortgage payment, often abbreviated as "PITI."
Principal
This is the initial amount of money you borrow to pay for your home. (In essence, it's the price of your home, less your down payment).
Interest
Just like your credit card, your mortgage will have interest. The rate will depend on your specific loan, and it will be bundled into your mortgage and paid monthly.
Taxes
You'll pay taxes on your home or property, but your lender will make this convenient by collecting a monthly fee, then paying your taxes for you.
Insurance
Just like with taxes, your lender will likely collect a monthly payment for your homeowner's insurance, then forward the payment to your insurance company.
Going Loan Shopping and Getting Prequalified
Now that you know a little more about loans, it's time to sit down with some lenders and start chatting! Here's how to get started.
Get some referrals
How do you pick a lender? The best way is to ask around and find out who your friends, family, and yes, your Realtor, have liked working with in the past. You should also check with any companies your currently bank with.
Make some calls
Next, it's time to pick up the phone and start making some calls. Your potential lenders will likely ask you a number of questions—like where you want to buy, how much you want to spend, how much you make, etc.—and may start discussing your options.
Get prequalified
These lenders will also likely give you the option of getting prequalified, and your answer should be, "Yes!" Getting prequalified doesn't obligate you to any one lender, it doesn't take very long, and it provides you with a lot of information, including potential monthly payments.
Finding a Real Estate Agent in Manhattan
You don't have to work with a real estate agent, but it's highly recommended that you do, especially as a first-time buyer. There are a lot of finite details that go into buying a home, plus a lot of complicated-sounding legal jargon. Real estate agents offer a LOT of other great benefits, too, like knowing where to search for homes based on your particular wants, needs, and budget, and being able to negotiate on price and terms. Agents also know how to handle things like home inspections and appraisals, and even understand the more complex requirements of specific specialty loans. Best of all—you don't pay for an agent! That's right—agent commission for the buyer's agent is paid by the seller, not the buyer!
Shopping Homes for Sale in Manhattan
Once you find an agent, it's time to start searching! Your agent will likely discuss specifics of what you're looking for in a home (size, location, additional features), and may encourage you to create a list of wants and needs. Based on your feedback, your agent will create a list of potential homes and together, you'll take some tours.
Tip: When you start touring, be sure to take detailed notes or photos of each home so you remember what you liked (and didn't like) about each one.
Making an Offer
You found the perfect house, and now it's time for your and your agent to sit down and discuss your offer. It's important to work together to determine a price you can comfortably afford but will also be a realistic offer for the seller to accept and will not be dismissed against any competing offers the seller might receive.
Offer, Negotiate & Sign
Purchase & Sale
This official offer statement details the price you'll pay, the dates of the close, and any contingencies you'll request, like an inspection and appraisal.
Negotiations
Once receiving your offer, the seller has three options: accept and sign the agreement, refuse the offer, or return a modified Purchase and Sale with adjusted terms.
Inspection
If any potential or existing maintenance problems or issues are uncovered during your home's inspection, you as the buyer may request repairs or a price reduction, or may walk away from the sale entirely.
Finalize your loan
Time to submit all the paperwork! During this time, an attorney will review all your mortgage paperwork, as well as legal documentation associated with buying your particular home or property.
Sign & pay
On closing day, you'll sit down with your agent, your lender or their attorney, and the seller's agent and attorney to sign all kinds of paperwork officially transferring the property from their name to yours.
Get the keys
Once you hand over your down payment and finish signing, you'll receive the keys to your very first home! Congratulations!
Still Have Questions About Buying Your First Home in Manhattan?
We bet you do! Buying your first home is no simple process, and though we have tried to provide as many important details as possible, there's still much to ask and learn. So don't wait—contact us today and ask away! Want to do some more reading? We have plenty of resources to help you out.