Ask an Agent: How much cash do I need to buy a NYC apartment?

In this week's 'Ask an Agent' column, the experts at The Agency--a tech-savvy brokerage that gives buyers and renters access to the same database of listings used by the city's real estate agents, and pays their agents bonuses for client satisfaction--advise prospective buyers on how much money you'll need in the bank to lock down a New York apartment, whether it's a co-op or condo you're after. Not seeing enough apartments for sale in your price range or target neighborhood -- and/or simply want to avoid a bidding war?  Consider expanding your search to include "off-market" listings.  The Agency's off-market listings team uses technology to mine public records and identify owners who may be ready to sell. You'll meet and deal with owners before their apartments hit the market. (Click here to learn more.)

“Most clients that I speak to are aware that the standard down payment to purchase an apartment here will be at least 20 percent, but many of those clients also believe that once they have saved up that 20 percent they will be ready to purchase an apartment.  Unfortunately, saving that down payment is just the start of the process.

Even once you have saved up the amount to pay a down payment as well as all associated closing costs, you most likely aren't done.  Boards will also want to see that you have post-closing liquidity.  What this means is that you didn't exhaust your bank account just to get your foot in the door, and that you will be able to afford the costs of living in the apartment once you have moved in.  Most often, boards will want to see that you have at least two year's worth of monthly costs (both maintenance and mortgage payments) in a bank account after you close.  Though this is more common in co-ops than it is condos, it is also a great rule of thumb to keep in mind when deciding whether or not you are ready to take on the financial commitment of purchasing a home.”- Emily Seils, Client Experience Manager

“The amount you'll need to have will be very building-specific, and depends on a lot of different factors. For instance, is it a condo or a co-op, and what are the fees being charged? A big factor in determining the amount of cash you will need is the condo versus co-op question. As Emily mentions above, condo closings costs tend to be higher, while co-op closing costs usually hover around $3,000 to $5,000 for units between $500,000 and $750,000 (Yay, no Mansion Tax!).

But in a co-op, the board will want to see that you've got 'post-closing liquidity' --  two years' worth of maintenance and mortgage payments in the bank. For example if your maintenance costs are $2,000/month and your mortgage is $3,000/month, you will need to have $5,000 for 24 months, or $120,000, remaining in cash. Of course, this is very building/board-specific so consult your agent about this.

At the end of the day, buildings just want to make sure you can afford the apartment, so keep that in mind when trying to figure out how much cash you need in order to buy. You also don't want to be left paying every penny you make into your monthly housing payments, so this is a good way to self-check and make sure you can truly afford the place you're interested in.” - Jennifer Lee, VP of Sales

“The answer will vary depending on  whether you're looking at a co-op or condo. Keep in mind that even the down payment amount is completely up to the co-op board’s discretion, and they can set maximum financing amount to any percentage they see fit. There are many co-ops that require a minimum of 30 percent down, and there are even some that require purchase to be all cash (no financing allowed).

As Emily and Jennifer mentioned, almost every co-op has a post-closing liquidity requirement of between 12 to 24 months in carrying costs (i.e. the combined cost of your mortgage and maintenance), and you'll need to have that in the bank on top of your down payment in order to be approved. That said, the closing costs are otherwise lower than they are in condos. Outside of your down payment, your closing cost for a $1,000,000 co-op will be an estimated $18,500—taking into account the mansion tax ($10,000), and lawyer and lender fees ($8,500). Additional to these costs, you will need to show 12-24 months of carrying costs, which is the sum of your mortgage and maintenance fees, in your bank accounts ($62,500 - $125,00).   

For condos, they will typically say that they will accept a 10 percent down payment, but you'll be hard pressed to find an owner willing to accept an offer for anything less than 20 percent down. This is because buyers are competing with so many other buyers that showing a 20 percent approval takes more risk off of the closing. And while condos do not have a post closing liquidity reserve requirement, your mortgage lender will still want to see that you'll at least have two to three months of reserves on hand after closing.  Also keep in mind that  condos are generally higher priced than co-ops in New York.

Since condos (unlike co-ops) are considered to be real property in New York State, you'll need to pay a NYS mortgage recording tax, which depending on the purchase price will be 1.8 percent or 1.925 percent of the mortgage amount. You will also need to pay for title insurance and searches, which is a hefty sum as well. Outside of your down payment, your closing cost for a $1,000,000 condo will be an estimated $42,750—taking into account the mansion tax, carrying costs, lawyer and lender fees, title insurance, and the mortgage recording tax.   

Keep in mind that this is a bare minimum  expense breakdown for both condos and co-ops. Expenses can be exponentially higher depending on the property in question.” - Devin Kogel, VP of Sales