Real Estate: The true cost of buying a home

01/27/2011 4:30 PM |

KATHARINE SCHROEDER PHOTO | First time home-buyers Matt Vescovi and Maggie Miller with their dog Tyson outside their Mattituck home.

With house prices still on the low side, some North Fork residents may be wondering whether it’s time to take the plunge into home ownership.

Maybe, maybe not.

It’s still all about money, and not just the sales price.

The heady days when just about anyone could qualify for an interest-only, no-money-down mortgage are long gone. That may mean even a modestly priced house is still out of reach for many.

“With a conventional loan these days, even if you have a steady job and good credit, you should budget for a 20 percent down payment,” said Southold mortgage expert Richard Winters.

“If you borrow more than 80 percent you need mortgage insurance, which is very expensive,” he added. “It used to be that you could get a first mortgage for 75 to 80 percent of the purchase price and a second for 10 to 15 percent and bring the down payment way down, but you can’t do that any more.”

Would-be buyers should also be prepared to pay substantial up-front expenses.

“On a $350,000 house, you need to budget for upwards of $15,000 for closing costs,” said Mr. Winters. “That includes items like a deposit to escrow, title insurance and New York State mortgage tax.”

Homeowners with mortgages routinely pay into an escrow account, which sets aside funds for recurring expenses, such as property taxes and homeowners’ insurance.

“And don’t forget the Peconic land tax, which is 2 percent of the purchase price above $150,000,” added Greenport realtor JoAnn Wind. That money is set aside for farmland preservation and open space purchases.

“And then there are the engineer’s inspection and the termite inspection that come up once the offer is accepted,” said Ms. Wind.
It’s helpful to use a realtor to get an idea about up-front costs and perhaps trim expectations about what is affordable.

“As a buyer you don’t lose anything when you work with a realtor,” Ms. Wind said. “We can definitely educate buyers about all the costs they may not be aware of and sift through properties that meet their needs. But people should also always get pre-qualified, to be financially prepared. I never want to be in a position with a client where the agent on the other side of the transaction has to ask if he or she is pre-qualified.”

It may not be all gloom and doom for a first-time home buyer, says Matt Vescovi of Mattituck. Mr. Vescovi, who will turn 26 this year, purchased his first home in December 2009 using a combination of resources to keep his out-of-pocket expenses very low.
“I was paying $1,000 in rent and my mom pointed out that I could own something for around that much a month,” he said. “I got pre-qualified for a loan and started looking around at properties. One house had major plumbing problems. I found that even a dump cost $300,000.”

Mr. Vescovi said there came a point when he began to wonder if he could come up with the necessary up-front cash. That was when his mom told him about Suffolk County’s assistance program for first-time home buyers.

“I applied and got approved and the grant covered my down payment,” said Mr. Vescovi. “But once you get approved, you have to find a house and nail down a loan within a certain time limit.”

The home he eventually found was a handyman special.

“I was like, no way, let’s leave,” said Mr. Vescovi of his first look at his very comfortable three-bedroom, two-bath, 850-square-foot home. “It needed a lot of work, and I ended up putting a lot of work into it without knowing if it would all work out in the end.”

Mr. Vescovi was approved for a Federal Housing Authority loan, which requires a lower down payment. However, FHA standards are very strict.

“There were so many stipulations,” he said. “It makes you think it can’t be done.”

But it did work out and Mr. Vescovi estimates he only had to find around $2,000 of his own money to seal the deal.

“No one knows about these Suffolk County grants,” he said. “You can’t sell or rent out the house for five years, but after that there are no restrictions. If you’re young, you should definitely take advantage of the program.”



8 Comment

  • It just doesn’t make sense to purchase a home on the North Fork with so many extra costs involved rather than just moving to another state where there is no Peconic Land Tax or State Mortgage Tax and the requirement of the Mortgage Banks demanding Lawyers Fee’s at the Closing. These costs alone are over half of the entire cost of Closing on a North Fork home!!!!!!

  • Funny, this article makes two diametrically opposing statements. The author postulates “with prices still on the low side” and the interviewed home buyer states ” even a dump costs $300,000″. Low side of what? Prices on the fork are still ludicrous, and are propped up by realtors and their up Island/NYC vacation home seekers. Too bad, it’s a special place..but not at twice the price of other special places around the country.

  • It’s the 1950’s again!! ” Hey guess what” ? You have to have money to buy a home bring 20-25% down and you better have a great credit score… Gone are the days of zero cash, little cash or 110% financing??? Maybe this country will learn its lesson?
    Just remember not everyone is entitled to own a home…

  • Home prices on Long Island are well out-of-reach for everyone. Realtors are to blame for the “blotted” prices that they set. For example, a house in Riverhead that we looked at for $359,000 was a dump. Needed much repairs. The realtor explained that the owners recently updated the landscaping with fancy bricks and stone. In addition, a privacy fence was added to the back yard. The house sits on a quarter-of-an-acre. Long Island citizens are income poor and land wealthy. The North Fork and the South Fork are only good for the “rich” who use these areas as “rest and relaxation” from their city dwellings. It’s the working North Forkers that suffer merceilessly at the local town and state elected government. Our local government officials are paid astronomical wages. No wonder our towns are going bankrupt and realtor agents and sellers are making out like bandits on the sale of the houses.

  • Not only are houses on Long Island out-of-reach for the locals, also, mobile home park owners are cashing in “big time” on their tenants. Mobile home park owners are raking in profit after profit on the fixed income and families that rent lot space. Our elected town officials rake in the big bucks. Some of our town clerks are elected by the town board. These town clerks possess no college education. Citizens who do run for town clerks and possess college education aren’t recognized. Only our town elected officials can afford the houses since they’re making more money than the natives. Also, realtors are mostly to blame for setting high prices for the sellers to make money and escape to other parts of the US where the sellers bask in luxury and sunshine. Realtors make out like bank robbers after the sale of the home.

  • Young people who are first-time-buyers should do their homework. New York State has the highest mortgage closing and mortgage refinancing costs in the entire nation. Also, remember that once you purchase a North Fork Property you are trapped until you find a buyer who will accept paying these Closing Cost Fees and Southold Property Taxes.

  • I bought my first home in 2009 and signed up for a first-time homebuyers class through the CDC thinking that I might qualify for some grants or something. After weeks of going to these classes, we were told we made too much. The funny thing is if you qualify for any of the programs they offer, you probably couldn’t or shouldn’t be buying a home. It’s very frustrating.

  • Keep in mind that a real estate professional doesn’t set the price of a home. The buying public does. It’s comparable sales that lender’s look at when the property is appraised that validates the selling price . Working with an experienced Realtor will greatly benefit today’s buyer in making a sound decision, at a fair, market based selling price.