With house prices still on the low side, some North Fork residents may be wondering whether it’s time to take the plunge into home ownership.
Maybe, maybe not.
It’s still all about money, and not just the sales price.
The heady days when just about anyone could qualify for an interest-only, no-money-down mortgage are long gone. That may mean even a modestly priced house is still out of reach for many.
“With a conventional loan these days, even if you have a steady job and good credit, you should budget for a 20 percent down payment,” said Southold mortgage expert Richard Winters.
“If you borrow more than 80 percent you need mortgage insurance, which is very expensive,” he added. “It used to be that you could get a first mortgage for 75 to 80 percent of the purchase price and a second for 10 to 15 percent and bring the down payment way down, but you can’t do that any more.”
Would-be buyers should also be prepared to pay substantial up-front expenses.
“On a $350,000 house, you need to budget for upwards of $15,000 for closing costs,” said Mr. Winters. “That includes items like a deposit to escrow, title insurance and New York State mortgage tax.”
Homeowners with mortgages routinely pay into an escrow account, which sets aside funds for recurring expenses, such as property taxes and homeowners’ insurance.
“And don’t forget the Peconic land tax, which is 2 percent of the purchase price above $150,000,” added Greenport realtor JoAnn Wind. That money is set aside for farmland preservation and open space purchases.
“And then there are the engineer’s inspection and the termite inspection that come up once the offer is accepted,” said Ms. Wind.
It’s helpful to use a realtor to get an idea about up-front costs and perhaps trim expectations about what is affordable.
“As a buyer you don’t lose anything when you work with a realtor,” Ms. Wind said. “We can definitely educate buyers about all the costs they may not be aware of and sift through properties that meet their needs. But people should also always get pre-qualified, to be financially prepared. I never want to be in a position with a client where the agent on the other side of the transaction has to ask if he or she is pre-qualified.”
It may not be all gloom and doom for a first-time home buyer, says Matt Vescovi of Mattituck. Mr. Vescovi, who will turn 26 this year, purchased his first home in December 2009 using a combination of resources to keep his out-of-pocket expenses very low.
“I was paying $1,000 in rent and my mom pointed out that I could own something for around that much a month,” he said. “I got pre-qualified for a loan and started looking around at properties. One house had major plumbing problems. I found that even a dump cost $300,000.”
Mr. Vescovi said there came a point when he began to wonder if he could come up with the necessary up-front cash. That was when his mom told him about Suffolk County’s assistance program for first-time home buyers.
“I applied and got approved and the grant covered my down payment,” said Mr. Vescovi. “But once you get approved, you have to find a house and nail down a loan within a certain time limit.”
The home he eventually found was a handyman special.
“I was like, no way, let’s leave,” said Mr. Vescovi of his first look at his very comfortable three-bedroom, two-bath, 850-square-foot home. “It needed a lot of work, and I ended up putting a lot of work into it without knowing if it would all work out in the end.”
Mr. Vescovi was approved for a Federal Housing Authority loan, which requires a lower down payment. However, FHA standards are very strict.
“There were so many stipulations,” he said. “It makes you think it can’t be done.”
But it did work out and Mr. Vescovi estimates he only had to find around $2,000 of his own money to seal the deal.
“No one knows about these Suffolk County grants,” he said. “You can’t sell or rent out the house for five years, but after that there are no restrictions. If you’re young, you should definitely take advantage of the program.”