Buying a home in New York City: payments, closing taxes and HomeFirst

#Owning in a city of renters

Most New York City households rent: 32.7% of occupied homes are owner-occupied, the lowest share among the 20 large cities we cover and well under the 54.3% statewide. The housing is old, too — the median home was built in 1953, the second-oldest among those cities — so inspections, building finances and repair reserves deserve as much attention as the rate.

The price-to-income ratio of 9.6 is far above the state’s 5.2. Census values cover houses, condo units and co-op apartments together, and prices differ widely between boroughs.

#Monthly cost of a median-priced NYC home

Putting 20% down removes PMI and cuts the payment by $881 a month, but it means bringing $77,860 more cash. The mortgage payment calculator opens with the city’s median value and tax ratio.

#NYC transfer and mortgage recording taxes

Three layers of tax can apply when you buy in the five boroughs, and two of them are city-specific.

• NYC Real Property Transfer Tax: 1% of the price for a home valued at $500,000 or less, and 1.425% above that. The Department of Finance applies the same residential rates to one- to three-family houses, condo units and co-op apartments.
• New York State transfer tax: 0.4% statewide, plus the buyer-paid mansion tax on homes of $1,000,000 or more. In the city, the state also adds a supplemental tax of 0.25%–2.9% on residential sales of $2,000,000 or more.
• Mortgage recording tax: 2.05% of the loan for mortgages under $500,000, and 2.175% on houses and condo units with larger loans, against about 1% in most of the state.

Because the recording tax follows the loan, a bigger down payment trims it too: with 20% down the tax falls to $13,548. Model your own price in the closing cost calculator, and see the closing costs guide for the fees that sit on top.

#What a median income buys in the five boroughs

The median city household earns $81,228. Keeping housing under Freddie Mac’s 30% guideline gives $2,031 a month, which supports a price of about $263,000 with 10% down at today’s average rate — roughly $515,600 short of the median value. Covering the median home’s payment within the same guideline takes an income near $240,000.

Ways to close a gap like this include a second income, a smaller unit or a borough with a lower price level. The affordability calculator shows how far your income stretches at several debt-to-income limits.

#HomeFirst: HPD’s down-payment loan

HPD’s HomeFirst Down Payment Assistance Program lends first-time buyers up to $100,000 toward the down payment or closing costs as a forgivable loan. The main rules:

• Household income up to 120% of area median income, and homebuyer education with an HPD-approved counseling agency.
• At least 3% of the price from your own funds.
• A one- to four-family home, condo or co-op that you live in, with an owner-occupancy period of up to 15 years.
• An existing one-family home priced at or below the borough limit: $732,000 in Brooklyn and $661,000 in the Bronx, Manhattan and Staten Island.

The citywide median value is above every borough’s HomeFirst limit, so HomeFirst buyers usually shop below the median. At the Brooklyn limit, the maximum loan would cover about 14% of the price, on top of the $21,960 you would put in yourself. For statewide SONYMA loans and the rest of the state’s rules, see the New York guide.

#Property tax and flood zones

New York State has the fifth-highest effective property tax ratio of any state, but the city’s ratio of 0.86% is lower than the state’s 1.45%; the median owner pays $6,669 a year. Ask for the actual bill on any home you consider, since it depends on the property’s class and assessment.

Waterfront neighborhoods can sit inside FEMA high-risk flood zones. If a home is in a Special Flood Hazard Area and your loan comes from a federally regulated or insured lender, flood insurance is required. Look up the address on FEMA’s Flood Map Service Center before you sign a contract.

For comparison, see how closing taxes work in Chicago and Los Angeles, which also add city transfer taxes. If you are weighing renting against buying, the rent vs buy calculator starts from the city’s median rent of $1,811/mo.