Maybe the idea of buying your first home fills you with excitement (Your own garden! Painting the front door bright red!) and maybe it fills you with dread (How will you find a down payment? How will you find a plumber?). Maybe it's a little of both. Long Island's experts, from real estate agents to recent first-time home buyers, offer tips for hacking the homebuying process.
Education is key (and free!)
Buyers don't have to start from scratch when shopping for a home. Help is available — and often at no cost. "Education is the best starting point," says Carol Yopp, director of counseling and program manager of the Long Island Housing Partnership, a Hauppauge-based nonprofit serving Nassau and Suffolk counties. "Some people put the cart before the horse and look for a Realtor before getting a housing counselor, but that can be a mistake."
Yopp suggests visiting hud.gov to find a nonprofit housing counseling agency, such as the Long Island Housing Partnership or the Community Development Corporation of Long Island. Counselors can help potential buyers find mortgages, understand financial issues, search for a real estate agent or attorney and even get financial assistance (see below).
Buyer's agents versus seller's agents
Many first-time home buyers don't know that there are two types of agents: seller's agents (also called listing agents) and buyer's agents. "A listing agent, who represents the seller, is trying to get the highest price — when you're working for the seller, your job is to sell that home," says Mia Pizzo, a buyer's agent at Daniel Gale Sotheby's International Realty's Northport offices. "But when you're working as a buyer's agent, you're allowed to point out problems."
Signing a buyer's agent contract means committing to working with one agent in the area. The buyer doesn't technically pay the agent. Sometimes the buyer's agent fee is included in the price of the home; sometimes it's included as part of the listing; sometimes it's negotiated into the final offering instead. If an agent fee isn't paid by the seller, sometimes the home price may be reduced to accommodate that fee. It all depends, and all of this gets negotiated between the buyer and the buyer's agent.
Get a grant
The Nassau County and Suffolk County down payment assistance programs and the State of New York Mortgage Agency all offer grants for first-time buyers. There are income guidelines for such programs, which are based on a percentage of the HUD Median Income Limits. They are also based on household size. All potential buyers must provide tax returns as well as recent pay stubs to make sure they are eligible for the programs. The State of New York Mortgage Agency's down payment assistance loan is granted up to $15,000. The loan has no interest and no monthly payments, and will be forgiven after 10 years as long as the borrower keeps the financing in place and continues to occupy the home.
But finding these grants and others requires help. "I always suggest that first-time home buyers work with an institution that has an affiliation with the LIHP or the CDCLI," says David Wynne of People’s United Bank, referring to Long Island Housing Partnerships and Community Development Corporation of Long Island. Wynne, senior vice president and director of sales in the residential and consumer lending division at People’s United Bank, adds that housing organizations provide education seminars.
"These institutions act as an ambassador for these grants, and some banks will even reimburse for the fees of these classes, if such fees exist," he says. "The reason these classes are required for grants is because the rate of default for people who take these classes is less than 1 percent," says Wynne. "The classes help buyers learn about budgeting and expectations."
Commitment to lend
Buyers need to understand the different types of mortgage preapproval. According to Pizzo, the strength of the mortgage preapproval can make a big difference in this competitive market. "There are three types of preapproval," Pizzo says. "The first is prequalification, which is just a conversation. Then there's a preapproval, which involves sending in taxes and paperwork and means someone at the bank knows what you can afford. Then there's a precommitment, which gets reviewed by underwriters, as if you're already under contract on a home. Precommitment really speeds up the process of the sale."
Wynne says that precommitment essentially means a buyer has a bank's financial approval, making it the strongest kind of financial preapproval a bank can give. "It's telling the seller you're making a commitment to buy," he says. "For a seller, it makes it a pretty attractive offer." That said, Wynne says any commitment to lend should be updated every 90 to 120 days to make sure nothing has changed in the applicant's finances.
Homeowners in New York State who earn a combined income of less than $500,000 may be eligible for the New York State School Tax Relief Program, also known as the STAR program. But rules changed in 2016, and buyers should know what’s new. "Every township is different, and STAR deductions have changed recently," Wynne says. "For the most part, with most townships on Long Island, you used to see an immediate deduction with your tax base requirement."
Wynne says that changed in 2016. "Now, instead of a reduction in your tax bill deduction, you receive a refund check," he says. It's worth figuring out what your potential STAR deduction will be, though, because according to nyc.gov/star, the average refund is just over $300 per year. Housing help agencies such as Yopp's can help first-timers figure out what their potential deduction might be.
Check for certificates of occupancy
When anything gets added to a property, whether it's a deck or a bathroom or an extension to the house, the homeowner may need to file for a permit, and the finished product gets a certificate of occupancy, or CO in real estate lingo. That means the new structure or addition has been inspected for safety and code compliance, and is approved for use. Yet sometimes owners decide to improve their homes, and either they don't realize they need a CO, or they don’t want to face property taxes associated with the improvements. That's when problems can arise.
"If buyers see a shed or a pool or a deck or anything like that, they should ask for a CO," says Catherine Lindstadt, an agent in the Huntington office of Douglas Elliman Real Estate. "For instance, lots of people have finished basements, and years ago no one cared about that, but now many towns would like you to have a CO for that."
Lindstadt says CO issues can arise when a buyer is getting a mortgage, and the bank attorney sees that a currently existing addition wasn't on the original property survey. Buyers will need to get COs settled before the sale, or face the possibility of fines or additional property taxes down the road. And beware of real estate lingo. "If the listing agent says the shed is 'a gift,' that may mean there's no CO," Lindstadt says.
Know the real price
Mortgage costs aren't the only costs associated with buying a house. "On Long Island, a typical mortgage payment includes property tax, but I tell my clients to make sure they factor everything in," says Lindstadt. There are bills for utilities, water, homeowner's insurance and, sometimes, homeowner's association fees, for instance — not to mention closing costs. Ask about those expenses as a buyer. When it comes to other costs, such as utilities, "you can even ask for copies of summer and winter bills, so you know what to expect," she says.
Buyers should be aware that home warranties exist and, if they want to buy one, make sure they include one in the general cost of owning a home. "A home warranty, which is kind of like insurance, covers a lot of issues in the house," Pizzo says. "Let's say your stove breaks one month into owning the home. A home warranty would cover that."
Pizzo says such warranties run about $600 a year, with a variety of packages available from various companies such as American Home Shield or Sears Home Warranty. It's best to shop around and compare policies, much like you would do with any other type of insurance policy. Some items covered include HVAC systems, boilers and kitchen appliances. "If you have a big-ticket item that goes, it covers a good portion of the cost," Pizzo adds."
How these first-time buyers did it
Buyer: Yalissa Taveras
Community: Brightwaters Manor, Bay Shore
Closing date: May 2018
Hacks: Grants; STAR; buyer's agent
Yalissa Taveras is an emergency room nurse. When she decided she was ready to buy her first home, her employer, Northwell Health, directed her to the educational program at the Long Island Housing Partnership. "The program provided a first-time home buyer group seminar as well as an individualized mortgage counseling session with a certified mortgage counselor," she says. Her counselor showed her all the options available to her, and eventually helped her qualify for grants and assistance to buy her home, which she shares with her two children, Trystan, 5, and Hunter, who is almost 2.
She also qualified for an Employer Assisted Housing Program (EAHP) through Northwell Health. EAHP programs can provide significant down payment assistance. "Buying a home is a long and involved process," she says. "But there are people out here trying to make it as smooth and comfortable as possible."
Fortunately, she had a few inside advantages. "I was lucky enough to work with someone who was both a nurse and a Realtor," she says. Her co-worker, Anthony LaBate from Charles Rutenberg Realty, worked as her buyer's agent throughout the process, and also helped her get a mortgage. "I had a lot of support during my first-time home buyer process," she says. She recommends all first-time buyers look into assistance programs. "There are many underused resources out there," she says. "There's a ton of paperwork involved, and the fax machine will become your new best friend. And it's not as easy as it looks, so be patient with the process. This is probably the biggest investment you’ll make, so be happy with your decision."
Buyers: Damon Ridge and Sherice Ridge
Closing date: March 2018
Hacks: Buyer's agent; STAR; closing costs
When Damon Ridge, 39, a New York City Department of Sanitation employee, and his wife Sherice, 37, a Metropolitan Transportation Authority conductor, started looking for their first home, they were living in Springfield Gardens, Queens. They lacked familiarity with some of the ins and outs of Long Island real estate. The couple signed an exclusive agreement to work with Christopher Bacchus of Douglas Elliman Real Estate, a buyer's agent who was able to help them navigate the area. "We expected to find a house, but getting a bank to finance the purchase and agree on a price and down payment and closing costs and sign wasn't that easy," Damon Ridge says. "Thankfully Chris had our back, and made the process easy. He explained everything, so we weren't in the dark."
Ridge also says he found out about the STAR program through Bacchus. "If I was to give any advice to other new home buyers about the STAR program, I would tell them it's a great incentive," Damon says. "It gives you a little break from paying the maximum tax on your home — it makes a difference."