Buying an apartment in NYC requires a different loan process than a single-family home. Getting the best financing options will depend on whether your condo is warrantable or non-warrantable.
A warrantable condominium follows rules set by Fannie Mae and Freddie Mac, making it eligible for conventional mortgage financing. It’s usually required that you put at least 20% down.
Government-Backed Loans
Buying a home can be tough if your credit isn’t great or you don’t have enough money saved for a down payment. That’s why government-backed loans were created – they help make it easier for borrowers to qualify for mortgages. These loans are insured by a federal agency like the Federal Housing Administration, Department of Veterans Affairs, or U.S. Department of Agriculture, and they can make it easier for first-time buyers to meet requirements.
Unlike conventional mortgages, which are not guaranteed by the federal government, government-insured loans reduce the risk for lenders by helping ensure they will be paid back if a borrower defaults on payments. This makes them less strict about credit and debt-to-income (DTI) requirements than traditional loans, and they often offer benefits such as lower interest rates, down payment assistance programs, or streamlined loan application processes.
To find out if your mortgage is backed by the government, check with your lender or use the Freddie Mac or Fannie Mae lookup tools online. You can also ask your mortgage servicer directly – they are required by law to tell you. If you’re interested in getting pre-approved for a mortgage, contact Contour Mortgage for more information and to learn about the qualifications, requirements, and benefits of government-backed loans. You can also download our free mortgage preparedness e-book for tips and advice on how to prepare for homeownership.
Short-Term Loans
Unlike long-term loans, short-term loans are typically repaid within a year or less. They are unsecured because the borrower does not provide any collateral as security against repayment, and they usually have higher interest rates than other types of debt to compensate for the high risk that lenders take in lending.
Examples of short-term loans include bank overdrafts, which are temporary coverage extended by banks at a hefty interest rate, credit cards, lines of credit that banks extend to their members and bridge loans that are used during real estate transactions to cover the time when the buyer’s existing home is still on the market. Generally, these loans can be obtained quickly and easily online by providing an application, proof of income, form of identification, bank account information and loan terms to lenders who will then review and compare the options before granting the funds.
Often, these loans can be approved in as little as 24 hours. Borrowers who are prequalified can receive multiple loan estimates to compare, and once the loan is finalized, funds may be transferred to the borrower’s bank account within the same day that they are agreed upon.
Jumbo Loans
Jumbo loans are larger than conforming loans and can be used to finance one- or two-unit apartment buildings. Typically, a jumbo loan is needed when you need to borrow more than the current FHFA maximum limit for single-unit homes in your area (which adjusts each year). It’s important to remember that any mortgage loan must be paid back with interest over time. Therefore, when you take out a jumbo loan, your monthly payments may be higher than with other loan types.
Since jumbo mortgages are riskier for lenders than conventional or government-backed loans, you’ll likely have to meet more stringent credit and down payment requirements. For example, you’ll usually need to have an excellent credit score and a debt-to-income ratio that’s below 36%. In addition, many lenders will require a cash reserve of six to 12 months of mortgage payments and property taxes, homeowners insurance and homeowners association, or HOA, fees to demonstrate your ability to repay the loan.
Given that current apartment mortgage rates are at their highest in 14 years, buyers should do everything possible to improve their financial profile before applying for a jumbo loan. This might mean bolstering savings, addressing errors on their credit reports and paying down large balances. This will help them qualify for a more competitive rate and lower their overall borrowing costs.