Purchasing a home for the first time can be both exciting and overwhelming, especially in a city like New York. First-time buyers often face unexpected challenges at closing, misconceptions about closing dates, and problems in the preapproval process.
To minimize stress and avoid costly mistakes, it is essential to have an experienced real estate attorney by your side throughout the entire process. At Sishodia PLLC, our team of New York real estate attorneys can guide you through the process of buying your first home in New York City. Call us today at (833) 616-4646 to schedule a consultation.
The National Association of Realtors reported that first-time buyers made up 49% of the residential market in New York. According to recent market trends, 2025 may see shifts in first-time homebuyer activity as affordability challenges persist. Rising home prices, higher mortgage rates, and limited inventory continue to make homeownership difficult, especially in high-cost areas like New York. While assisting first-time buyers in New York, we have observed the following common challenges they face:
Closing Cost Unexpected Fees
Closing costs in New York City can be a significant expense, often adding tens of thousands of dollars to the purchase or sale of a property. Many first-time buyers are surprised to learn that the net amount available at closing is not the same as the loan amount. Lenders typically deduct various fees, including lender’s counsel fees, appraisal fees, and escrow fees, which reduce the amount disbursed at closing.
The total closing costs vary depending on the property type and transaction details. When purchasing from a sponsor, where the original owner is a developer, buyers are often responsible for additional costs that are typically paid by the seller in resale transactions. These may include New York City and state transfer taxes, the sponsor’s legal fees, a working capital fund contribution equal to two months of common charges or maintenance fees, and a portion of management unit costs.
For buyers who finance their purchase, the mortgage recording tax adds another substantial expense. This tax is 2.05% for mortgages under $500,000 and 2.175% for mortgages of $500,000 or more. Unlike co-op purchases, where no mortgage recording tax applies, buyers of condos and townhouses must factor this cost into their budget. Other expenses may include title insurance, attorney fees ranging from $1,500 to $3,500, and the mansion tax, which applies to properties priced over $1 million and starts at 1% of the purchase price.
Misconception of the Closing Date
Most real estate contracts in New York include an “on or about” closing date, which serves as a target rather than a firm deadline. Many first-time buyers mistakenly believe this guarantees the closing will occur on that specific day. In practice, this date is flexible, and it is customary for either party to adjourn the closing for a reasonable period, typically up to 30 days, depending on the circumstances. This flexibility is especially beneficial for buyers obtaining financing, as it provides additional time for loan approval and closing preparations.
On the contrary, when you buy from the sponsor or developer, the closing date is going to be crucial, as time is of the essence. In such cases, any party not prepared to close on the given date will be in default, regardless of the reasons. Most of the sponsor’s contracts will not provide an exact date but rather a provision that the buyer will be given a 30-day written notice of the closing date at the later stage when the building declaration is recorded. Most of the practitioners negotiating sponsor contracts will request a right to adjourn the closing one time without penalty, which will give the purchaser a little flexibility to close and even put financing in order if financing is involved.
Timing and Coordination Challenges in New York Real Estate Closings
Since there are multiple parties involved in a real estate transaction, delays can happen. When you schedule the closing, you need to gather several parties at the same time in the same place, which can be challenging due to the conflict in schedules.
- Main parties for a coop purchase transaction: transfer agent or real estate attorney, seller’s counsel, seller, buyer’s counsel, buyer, lender’s counsel (if financing is involved), and pay off attorney (if the seller has a loan on the premises).
- Main Parties for a condo purchase transaction: seller’s counsel, seller, buyer’s counsel, buyer, lender’s counsel (if financing is involved), and title company.
An additional challenge arises when closing figures are not available until the closing date. Preferably, the seller and buyer are given the closing figures prior to closing. However, it does not always happen in practice.
As of 2025, the documents used in real estate closings continue to follow the regulatory changes introduced by the TILA-RESPA Integrated Disclosure (TRID) rule under the Dodd-Frank Act. The HUD-1 Settlement Statement and Good Faith Estimate, which were previously used in mortgage transactions, have been permanently replaced by the Closing Disclosure and Loan Estimate forms.
The Closing Disclosure provides a detailed breakdown of loan terms, closing costs, and other financial details. Lenders are required to deliver this document to borrowers at least three business days before closing, giving them time to review the final terms and identify any discrepancies. The Loan Estimate, provided within three business days of a mortgage application, outlines expected loan costs and terms upfront, allowing buyers to compare loan options more effectively.
These changes, implemented by the Consumer Financial Protection Bureau (CFPB), aim to enhance transparency in mortgage lending and prevent unexpected costs at closing. The “Know Before You Owe” initiative ensures that borrowers have clearer, standardized information regarding their loan obligations.
While the TRID has streamlined the disclosure process, it also introduces additional review periods that can affect closing timelines. Buyers, sellers, and lenders must coordinate carefully to meet disclosure deadlines and avoid last-minute delays in the transaction.
Home Inspection May Reveal Crucial Facts
With regard to a home inspection, timing is a crucial aspect. It is important to mention that buyers should perform a home inspection before entering into a binding purchase agreement to avoid adverse consequences. Once a buyer signs the agreement, the chance to change the agreed price based upon the bad conditions of the real property will be highly diminished.
Especially when buying a house in New York, a home inspection may reveal environmental issues (like soil contamination, high levels of radon, structural defects, toxic mold, etc).
Ordering Lien Search Prior to the Board Approval May Be a Waste of Buyer’s Money
A similar timing aspect is applicable to lien searches and other records. These records include Real and Personal Property transfers, interest, and ownership information. The Offices of the City Register maintain the New York City public records for the Bronx, Brooklyn, Manhattan, and Queens. Nevertheless, the best advice here is not to order a lien search prior to the board’s approval. Otherwise, it would be a waste of the buyer’s money if the approval were denied by the board.
Lender’s Preapproval May Not 100% Guarantee a Loan
In order for the purchaser to get financing there are three conditions to be met: 1) the buyer has to qualify financially; 2) the project, the building has to be approved by the lender; 3) Appraisal has to be at a purchase price for the lender to provide 80% or more of the Purchase Price.
Another challenge for first-time buyers is the underestimation of the lender’s preapproval, particularly when distinguishing between prequalification and preapproval. Prequalification is an initial assessment where a lender provides an estimate of how much you might be able to borrow based on self-reported financial information; it does not involve verification and serves as a general guide. In contrast, preapproval is a more rigorous process where the lender verifies your financial details, including credit history, income, and assets, resulting in a written commitment for a specific loan amount, thereby enhancing your credibility as a buyer.
Borrowers may be required to explain any large deposits in their bank account within two months prior to the buyer’s application for credit. Thus, it is important to prepare for this pre-approval process in advance. Additionally, it would be beneficial for buyers to learn how much they can afford.
Real Estate Disputes
Sometimes, things don’t work out as planned after closing. There may be issues down the line with the title, land use, landlord-tenant, deed limitations, zoning issues, landlord/tenant issues, and issues with easements.
For any dispute, it is important to consult a New York City attorney. Sometimes, a case or statute may cover the issue, and you may need a legal professional who can help you understand your rights in the transaction. It may also be possible to reach an agreement before costly litigation ensues. For example, tenants may have a right of habitability implied in a lease. This right of habitability covers tenants who occupy residential buildings that are rented to them, as well as the common areas. However, if a tenant makes the apartment unsafe or unlivable, the tenant might be required to repair it.
Although commercial tenants may not be as protected as residential tenants, they do have rights. For example, they have the right to terminate a lease if a rental is no longer available or is unfit for occupation through no fault of the commercial tenant. The tenant may have the right to leave and surrender possession of the rental property. They will also be freed from paying rent. When you deal with a real estate dispute, whether it’s connected to a commercial or a residential lease, it is always best to consult a qualified New York City real estate attorney. Call to make an appointment to speak with Natalia Sishodia at (833) 616-4646.
Preferred Rates of Homeowner’s Insurance May Not Be Easy to Obtain
Securing favorable homeowner’s insurance rates can be challenging, as insurers evaluate various factors beyond mortgage approval. One significant aspect is your credit-based insurance score, which insurers use to assess risk. This score, derived from your credit history, can substantially influence your insurance premiums.
It’s important to note that while a mortgage approval indicates financial credibility, it doesn’t automatically guarantee favorable homeowner’s insurance rates. Insurance companies evaluate risk differently and may not extend coverage offers solely based on mortgage approval. Our advice here is to apply to several insurance companies in order to create a backup plan.
How Soon After Buying a House Can You Sell It?
Selling a property can bring about uncertainties for many homeowners, especially when they have invested considerable time, effort, and emotional attachment. These sentiments can become more apparent when potential buyers show interest in purchasing your home.
As the owner of the property, you have the right to withdraw it from the market at any time. If you are handling the sale on your own, you can remove the listing from all advertising platforms. However, it’s important to note that you may not be able to recover the expenses you incurred for marketing. If you are working with a real estate agent, you need to adhere to the terms stated in your contract. If you decide to terminate the contract with your current agent and engage another one, there might be early termination fees and additional penalties depending on the resources and time invested by the agent.
How Much Do First-Time Home Buyers Have to Put Down in New York?
For first-time home buyers in New York, understanding down payment requirements is crucial for planning your home purchase. The down payment is the initial upfront portion of the total purchase price of the property that you pay out of your own funds.
Typically, most first-time buyers will need to put between 3% and 3.5% down. This range primarily depends on the type of mortgage you qualify for. A conventional mortgage usually requires a minimum down payment of 3%. On the other hand, if you opt for a Federal Housing Administration (FHA) loan, the minimum down payment is slightly higher at 3.5%.
However, if you are eligible for other types of loans, such as the USDA (United States Department of Agriculture) loans or VA (Veterans Affairs) loans, you could potentially purchase a home with $0 down. These programs are designed to help specific groups of buyers, such as rural residents and veterans, respectively, and can significantly reduce the barrier to homeownership.
It’s important for potential buyers to explore all available mortgage options and understand the eligibility criteria for each to determine the most feasible and economical path to homeownership. Consulting with a New York real estate attorney can also provide personalized insights and help you make an informed decision tailored to your financial situation. Contact Sishodia PLLC today to schedule a consultation.
Grants and Loans for First-Time Homebuyers in New York
Grants and loans for first-time homebuyers in New York help reduce upfront costs and make homeownership more accessible. Programs like the HomeFirst Down Payment Assistance Program and the State of New York Mortgage Agency (SONYMA) provide forgivable loans, low‑interest mortgages, and down payment assistance to eligible buyers.
One prominent option is the HomeFirst Down Payment Assistance Program provided by New York City. The HomeFirst Down Payment Assistance Program provided by New York City offers qualified first‑time homebuyers up to $100,000 in forgivable loans to cover down payments and closing costs when purchasing a one‑ to four‑unit home, condominium, or cooperative in New York City. To qualify, buyers must be first‑time homebuyers and complete a homebuyer education course, contribute personal savings by making a minimum down payment of 3% of the home’s price, and meet income eligibility requirements (for example, a four‑person household must have a maximum income of approximately $124,400). In addition, the home must pass a Housing Quality Standards inspection, and buyers must commit to living in the home for at least 10 years if the loan is $40,000 or less or 15 years if it is greater; otherwise, any remaining balance will be due if the property is sold, transferred, or refinanced before the end of the forgiveness period.
Similarly, the State of New York Mortgage Agency (SONYMA) offers competitive fixed-rate mortgages with low down payment options. For instance, the Achieving the Dream program requires a 3% down payment and is designed for low-income buyers, while Conventional Plus includes down payment assistance. SONYMA’s Down Payment Assistance Loan (DPAL) is a zero‑interest second mortgage that is forgiven after 10 years if the buyer continues to occupy the home, though income and purchase price limits vary by county and borrowers must contribute a minimum cash amount (typically 1% of the property’s value for 1‑2 unit homes and 3% for cooperatives and multi‑family properties).
Legal professionals play a key role in reviewing program contracts to ensure compliance with state regulations and to identify any clawback clauses or secondary mortgage terms that might affect future property transactions. During closing, mortgage lenders coordinate with grant administrators to verify that funds are properly disbursed, and buyers should consider potential tax implications, as some assistance may be taxable under New York and federal laws.
Understanding these programs’ requirements and benefits can significantly impact the financial aspects of buying your first home in New York. Consulting a real estate attorney can help clarify these obligations and facilitate a smoother transaction.
| Challenges Faced by First-Time Buyers | Description |
|---|---|
| Closing Cost Unexpected Fees | Buyers are surprised by the amount spent on closing costs, which can be tens of thousands of dollars. |
| Misconception of the Closing Date | Closing dates are often “on or about” and not guaranteed. |
| Scheduling Difficulties | Coordinating multiple parties involved in the transaction can be challenging. |
| Changes in Closing Documents | HUD-1 and Good Faith Estimate are being replaced by new forms. |
| Importance of Home Inspection | Home inspections should be conducted before signing a purchase agreement. |
| Timing of Lien Search | Ordering a lien search should be done after board approval. |
| Lender’s Preapproval Challenges | Preapproval does not guarantee a loan and has specific requirements. |
Getting Legal Advice From a Skilled New York Real Estate Lawyer
The process of buying a home in New York City can present various challenges for first-time buyers. Understanding and addressing these challenges early on can greatly improve your experience and lead to a smoother transaction. Having a knowledgeable real estate attorney to guide you through the process will not only alleviate stress but also ensure that you are making informed decisions every step of the way. Don’t leave your investment to chance; contact Sishodia PLLC today at (833) 616-4646 to speak with an experienced New York real estate attorney and secure your dream home in New York.
Natalia Sishodia, Esq.
With assistance in Research by Natalia Lantonio
All rights reserved by Sishodia PLLC
