Editor’s Note: This blog post was originally published in June 2016 and has been revised to reflect industry updates.
Long Island in New York has become a hot commodity for those searching for a first home or relocating—especially young families.
Low interest and mortgage rates and a seller’s market similar to most U.S. suburban regions—with an influx of buyers but low inventory—adds to what can be an already challenging situation, however.
According to the Real Estate Market Update-March 2021 by New York State-specific multiple listing service One Key MLS, available properties on Long Island decreased 22.5 percent just in the last year.
Daily Long Island-based newspaper Newsday also reported current inventory is the lowest level to date, with four in 10 Long Island home sales resulting in bidding wars.
Below we’ll outline 11 steps on how to buy a house on Long Island, such as researching the best neighborhoods, specific mortgage and financial requirements, finding a realtor, getting an inspection, and other critical information.
1. Prepare and update your financial documents.
By now you should have examined your budget, current debts and expenses, and income levels to determine what you can afford. The next step is gathering relevant documentation for a mortgage pre-approval.
If you’re unsure of what to provide, it’s best to work with an experienced lender, such as Contour Mortgage. In the meantime, consult this quick tip list for specific requirements:
- Employment History
- Credit Score
- Last 60 Days’ Bank Statements
- Prior Two Years of Income Tax Returns & W2 Statements
- Recent Pay Stubs
- Social Security Card
- Divorce Agreement (if applicable regarding additional financial obligations)
- Other Necessary Documents
2. Obtain a pre-approval, commitment letter, or both.
A pre-approval is the first step of the mortgage application process. This proves to both sellers and realtors that a lender has vetted and evaluated your financial eligibility. A dollar amount based on factors such as income, assets, credit, and other variables will then be attached to how much of a loan you can comfortably afford.
Now that you know how much a lender is willing to provide, the next stop is a mortgage commitment letter. While this is a more lengthy process, it places you in an even stronger position than a pre-approval. Also known as a loan commitment letter, this document demonstrates your signed contract with the seller, signifying your readiness to purchase.
It’s recommended to take these important steps sooner than later, so you don’t risk having to rescind an offer on a property you cannot afford. Taking the time to do things right and seeking out a reputable mortgage lender is your best approach.
3. Find out which mortgage is best for you.
There are several loan types offered through Contour Mortgage, such as conventional and jumbo loans. Others include government-backed products provided via agencies such as the Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA), or Veteran Affairs (VA) for active and retired military personnel. Choosing the best option is dependent on several factors, such as debt-to-income (DTI) ratios, credit scores, monthly expenses, income requirements, and down payment percentages.
Many of these loans, especially government-backed products, often have lower down payment, DTI and credit score requirements. If you're a first-time home buyer, it’s also prudent to research grants geared toward prospective Long Island homeowners. Both Nassau and Suffolk counties offer programs providing down payment and closing cost assistance.
If you’re not sure of mortgage qualifications and requirements, talk to your lender for more information.
4. Research your preferred neighborhoods.
Following pre-approval and mortgage commitment, you’ll have a definitive budget to stay within. Once you understand your mortgage limits, you can research the Long Island neighborhoods that interest you the most.
While Long Island has so much to offer in general, not to mention its close proximity to New York City, it’s best to examine features such as school district ratings, parks and family-friendly activities, the distance to commuter transportation and major highways, and of course median home values.
Read our recently updated blog for additional insight: 10 Awesome Long Island Neighborhoods for Young Families.
5. Find a reputable realtor.
Working with a Long Island realtor can help pinpoint an ideal neighborhood, if you’re having trouble on your own. And since many realtors are experts on certain locations, you might consider an area you hadn’t previously thought of. Working with a realtor also takes searching and price negotiating off your already busy to-do list.
An experienced realtor can also be your eyes and ears when you can’t be there, or sense things about a property that only a professional will understand. It’s best to heed their advice, since they are working for you and your family’s best interests.
Most Long Island-based mortgage lenders can recommend a reputable realtor, or conduct research on your own through local associations, such as the Long Island Board of Realtors and Multiple Listing Service of Long Island.
6. If something is too good to be true...it probably is.
When visiting different properties and open houses, watch for any red flags hinting at problems with the house’s foundation, structural issues, or anything else indicating additional expenses.
If the home has outdated fixtures and decor, and you don’t have the time, money, or patience to complete these upgrades, consider a new construction, turnkey home, or properties requiring less maintenance.
If you’re handy and have the budget to take on a fixer-upper or rehab property, you can also bundle any renovation costs to your current mortgage.
Other budget-friendly options include purchasing homes designated as an estate sale or as-is property. Typically acquired via inheritance, these properties involve a seller who’s merely looking to accept the best offer and move on. The caveat with these homes is that exceptions usually won’t be made for any necessary repairs or upgrades prior to closing.
7. Make a solid and fair offer.
Once you find a property you're interested in, speak with your realtor to understand the cost of comparable homes in the area before making an offer. Due to the currently competitive Long Island real estate market, your offer will likely be one of many. If possible, offer at least the current asking price.
If the seller receives multiple offers, a bidding war could erupt, whereby buyers are willing to pay over the listed price.
8. Get a home inspection.
While most states don’t require an inspection to be performed until after the home is under contract, New York State law stipulates this must occur following an accepted offer.
Plan to spend between $300 to $500 for a full inspection. While this is an additional cost, it will save extra money and stress in the long run. The last thing you want is undiscovered issues such as leaks, flooding, structural damage, and evidence of termites or other wood-destroying insects. If certain conditions are present, some lenders could require a completed Wood Destroying Insect Inspection Report.
Consult with your realtor for reputable inspectors, or check local online review platforms. While industry feedback is helpful, you’d be ill-advised to hire a home inspector recommended by the seller.
9. Continue to keep your finances in check.
It’s imperative to maintain your current financials up until you close on the property. This includes continuing to save and budget for upcoming mortgage payments, lavish purchases, and retaining current employment. Nothing is official until you’ve closed on the property, and the seller legally transfers ownership.
10. The day you’ve been waiting for: closing time!
You’ve made it this far, and the big day has arrived to close on your dream home. If you’re not sure of everything you’ll need, it’s best to clarify with your mortgage lender, realtor, and real estate attorney.
On closing day, you’ll meet with the seller, their attorney, and possibly their realtor, as well as your mortgage lender, attorney, and title company representative. Specific closing costs can’t be itemized, as every state and lender has their own requirements. Mortgage lenders are, however, required to provide a closing cost estimate prior to the big day.
11: Make your move, and get settled.
Congratulations! You’re now the proud owner of a new home on Long Island. Before moving day, make sure you have all your important documents ready for a smooth transition.