Buying for the first time in NYC? Be sure to prep your finances first

Buying a house or apartment is likely the most serious financial commitment you'll ever make, and New York City’s complicated real estate market makes the task especially daunting. 

If you're planning on taking the leap to ownership, you'll want answers to critical questions about what you can afford, whether a co-op or condo makes better financial sense for you, and how to budget for closing costs and monthly maintenance or common charges. 

Brick Underground spoke to mortgage and real estate brokers to learn how to prepare financially for one of life's biggest decisions. 

1. Boost your credit score 

Good credit is the key to getting the best mortgage rate, said Melissa Cohn, regional vice president at William Raveis Mortgage. This is especially true for adjustable-rate, jumbo, and interest-only options, where the minimum credit score is higher than for conventional fixed-rate loans. 

According to Cohn, a buyer should have a credit score above 740 to secure the most competitive rate, but there are plenty of sound options for buyers with scores as low as 680. Additionally, some banks have no minimum credit score requirement. 

Cohn added that jumbo loan lenders generally require minimum credit scores to be over 700. "If you are looking for an interest-only loan, that minimum threshold will likely be even higher." Conforming loans allow lower scores.

Relatedly, lenders will want to see that you have multiple lines of credit (which you pay off regularly), including credit cards, student loans, and car loans. It's best to have at least a 12-month payment history on each of these.

Cohn noted that this can be a challenge for younger buyers, who often have fewer credit cards and installment loans than the minimum required to build a good credit score.

"The credit scoring system that we have is geared toward an older generation of people who have multiple credit cards and multiple loans," she said. "Many millennials have only one credit card, and they only buy things if they can pay cash for them."

That may be a wise decision for your finances, but it can be detrimental when applying for a mortgage. There are several ways to address this problem. Portfolio lenders—banks that lend their own money and do not sell off loans on the secondary market—have looser credit restrictions than national banks, Cohn explained. 

Indeed, good credit is crucial for getting pre-approved for a mortgage. Without it, you will have a difficult time getting a loan. 

Daniel Blatman, a broker at Compass, pointed out additional reasons a buyer's credit is critical.

"Banks have different incentives based on different credit scores. For example, they might offer a buyer with a credit score over 800 a closing cost credit rather than just a low rate. It’s also important to have strong credit to get that low rate, which helps the debt-to-income ratio/monthly payment, as well as getting approved by a co-op board,” he said

2. Know other factors for qualifying 

Banks want to see more post-closing reserves, and some lenders require that a portion be cash and not stocks or retirement assets.

For self-employed borrowers, some lenders require a profit-and-loss statement for the past 12 months, not just a year-to-date statement. They will also request two months of bank statements to verify the stated income. If the closing takes several months, they will ask for an updated profit and loss statement for the month prior to closing, along with updated bank statements. All salaried borrowers are asked to provide a pay stub verifying current employment dated within two weeks of the closing. 

Other hurdles exist, particularly for recent grads and twenty-somethings. In order to use bonus or commission income, lenders generally require that you have a two-year history with the same employer. This ensures there won't be any sudden surprises that upend your ability to make your monthly payments. 

Lenders will also look at your debt-to-income ratio to determine your eligibility.

"Based on today's underwriting, conventional fixed-rate lenders will go to 50 percent, but if your loan is an adjustable-rate mortgage, they want the maximum debt-to-income ratio to be no more than 43 percent," Cohn said.

The ratio applies not only to a property's mortgage and carrying costs; maintenance fees, taxes, student loans, and any other monthly debt count toward that 43 or 50 percent. This presents a challenge for millennials burdened by student loans, which is why many have given up on buying at all or may not understand what it takes to do so.

Financing for new-construction condos has also become more difficult to obtain, Cohn said. Many banks do not lend on a building unless it is 51 percent sold and meets FNMA (Federal National Mortgage Association, or Fannie Mae) guidelines for a warrantable building.

“Most banks adhere to this rule unless they pre-approve the building; however, there are banks that will finance in buildings with just the minimum 15 percent sold,” she said, adding that as the number of signed contracts increases in a building, rates and options improve. 

3. Budget for closing costs in addition to a down payment 

One mistake many prospective buyers make is focusing exclusively on saving for a down payment, overlooking the importance of budgeting for closing costs. These additional expenses can include your broker’s commission and taxes, as well as mortgage, attorney, and building fees, which vary depending on whether you're purchasing a co-op or condo (more on those differences below). Generally, buyers are advised to set aside 4 to 5 percent of the purchase price. (Check out Brick's guide to closing costs for buyers in NYC.)

In rare cases, buyers may need to set aside an additional 1 to 3 percent for a broker fee if the seller's compensation to the buyer's representative falls short. That's because fees for brokers who are members of the Real Estate Board of New York are “decoupled” as part of a policy that prohibits a seller’s broker from paying the buyer’s broker directly. The rule went into effect on January 1st, 2024, and makes broker fees more negotiable.

Theoretically, if a seller offers your broker a low fee, your broker may come to you to make up the difference. However, it is not a given that sellers will be that aggressive and risk a sale.

What is certain: You'll need reserves far beyond that down payment and upfront closing money. Co-op boards, in particular, require significant post-closing liquidity. 

“Co-ops are more restrictive than banks, so I typically underwrite a co-op buyer for the co-op vs. needing the pre-approval from a bank," Blatman said. "The co-op may look for requirements such as having enough in the bank to cover two years of mortgage and maintenance payments after closing.” So, for a $500,000 apartment, you'd need about $80,000 in cash after closing to cover those monthly costs.

A gift to cover these expenses is an option if you're fortunate enough to have relatives who want to help. “Because of the qualifications for purchasing, it’s very common for buyers to get a gift from a family member to strengthen their assets," Blatman said. "It makes them appear stronger to the board and the seller and makes the deal feel like it’s more of a sure thing.”

You'll still need sufficient personal assets, including an appropriate debt-to-income ratio and post-closing liquidity. For example, a buyer with massive student loans may not qualify to buy in a stricter co-op building.

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On a bright note, Cohn suggested that with new, higher conforming loan limits of up to $1,209,750 in NYC, borrowers can take advantage of a higher debt-to-income limit of up to 50 percent and reduced reserve requirements.

"This can be super helpful with a condo purchase," she said, but you still have to meet a specific co-op's debt-to-income requirements. There's another critical caveat: The building has to be warrantable by FNMA or Freddie Mac. "This means that the building has to be 51 percent sold and meet today's reserve requirements," she added. 

Regardless of financing, most co-op buildings require proof that you have already purchased homeowners' insurance, said Jeffrey Schneider, president of Gotham Brokerage. 

Schneider estimated that annual premiums for the minimum liability coverage of $300,000 start at about $400. "But many buildings are imposing higher liability coverage requirements, typically $500,000 to $1 million, as well as minimum limits for apartment improvements or additions. So $500 or $600 per year may be more realistic," he said.

4. Understand the market and your budget

Once you are pre-approved for a mortgage—which will help you figure out what you can afford—it's time to start looking for a property to buy. Now is the time to pay attention to market trends by reading real estate articles online (you've already come to the right place) and searching listings sites to see what's available.

Think of apartment-hunting as gaining knowledge, said Noah Rosenblatt, founder of real estate data analytics firm UrbanDigs. 

"Understand the options in your price point and area of needs. See the apartments and understand what features are trading at higher values and which inventory goes to contract faster. You'll gain a natural sense of what the market's doing," he explained. And now that banks have adopted a stricter lending approach, getting your finances in order is more crucial than ever. "In addition, with a tight supply dynamic in place, buy-side leverage could fade quickly if the upcoming spring market sees its usual seasonal strength."

According to Rosenblatt, lending rates have declined steadily throughout much of 2025, providing some relief for buyers in NYC markets. "With more than half of deals transacting in all cash, it's not surprising that this was not enough to increase contract activity or price action levels in any meaningful way. Our markets remain stuck in neutral, with many locales experiencing challenging listing environments," he said.

Furthermore, because every neighborhood behaves uniquely, Rosenblatt emphasized the need to understand local market conditions and seasonal patterns to develop more effective strategies for active buyers and sellers. "If something is not getting active traction or bids in the marketplace, one must wonder if it's a market problem, a product problem, or ultimately a price problem," he said. 

5. Weigh the pros and cons of co-ops and condos

When buying an apartment in NYC, the co-op vs. condo debate inevitably arises. The following outlines the key considerations for each property type.

Pros and cons of co-ops: About 75 percent of apartments for sale are co-ops, meaning buyers generally have more choices at lower price points. For buyers planning to stay long term, co-ops can be a good fit—especially if they value stability and community oversight.

However, co-ops come with stricter financial and board requirements. Buyers are typically required to make a larger down payment—often at least 20 percent, sometimes more—and meet a lower debt-to-income ratio, often around 25 to 28 percent, which can be more restrictive than a bank’s lending standards. Co-ops boards can also restrict how much financing you take out.

Rosenblatt noted the importance of knowing exactly what the board is looking for—and appreciating that co-op boards have significant discretion. Requirements, therefore, vary widely from building to building, so it’s critical to understand exactly what a board is looking for. Some boards, for instance, do not allow sublets, which is an important consideration if you plan to eventually rent your place. 

Monthly maintenance fees, which vary by property, are typically higher in co-ops because residents own shares in the building (unlike in condos, where you own the actual unit). These fees include the building’s underlying mortgage, property taxes, and costs associated with capital improvements, such as a new elevator. 

As part of their due diligence, your lawyer will typically review two years of the co-op’s budget and tax returns to ensure the building’s finances are sound and that monthly expenses are appropriate.

As Blatman noted, many first-time buyers underestimate the reality of these financial qualifications. While banks may approve mortgages with debt-to-income ratios of 40 to 50 percent, co-op boards often require much lower ratios (closer to 28 percent), which can prompt buyers to reconsider their building choice or adjust their finances.

Pros and cons of condos: Condos account for a smaller share of the market, so finding the right one may take longer. That said, condos offer significantly more flexibility in financing and use.

With a condo, buyers can generally finance up to the purchase price, and there are fewer restrictions on renting out the unit. This makes condos appealing to buyers who may not plan to stay long term or who want the option to rent in the future.

The main downside of purchasing a condo is higher closing costs, particularly when taking out a mortgage. Buyers must pay mortgage recording taxes and purchase title insurance. According to Rosenblatt, a buyer purchasing a $1 million condo could face up to $40,000 in additional closing costs. 

Condos also have monthly common charges, which are typically lower than co-op maintenance fees because they do not include the building's mortgage. However, property taxes are not included in common charges, so condos may not be more affordable overall once those costs are factored in. Like co-op fees, common charges can increase over time, and even small apartments can carry high monthly costs.

The bottom line: There's no one-size-fits-all answer to whether a co-op or condo is a more financially sound choice. It depends, several of our experts point out, on your plans for the apartment. Ask yourself how long you plan to live there and how much control you want over its usage. If you're settling in for the long haul, a co-op might be a good fit; however, if you plan to rent out your space, a condo is generally the safer choice.

6. Find a qualified team

"There are three people who are here to help," Rosenblatt said. "An attorney who is familiar with co-op and condo law, a lender who comes through for you, and a competent broker." 

Of the three, your broker is often the most pivotal. They've seen far more apartments than you possibly could and remain on top of market conditions, so expect them to offer second opinions and guide you in finding the right match. This guidance is especially valuable for first-time buyers, who tend to have more questions and benefit from a broker who is both patient and empathetic. 

A seasoned broker can also refer you to trusted lenders and help facilitate the mortgage pre-approval process

Equally important is hiring a reliable, NYC-based attorney with extensive experience representing buyers like you. If you're leaning toward a co-op, your lawyer should be well-versed in preparing the application package and reviewing the board meeting minutes for any red flags. 

"Buying in NYC comes with an extra layer of complexity," Cohn said. Assembling a strong team will help you navigate the process with confidence.

—Earlier versions of this article contained reporting and writing by Alanna Schubach.

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