The standard down payment for a condo in NYC is 20%. That said, some condos will accept less, and not every condo has a minimum down payment requirement. Some new developments in the city will accept payments of 10% or, in rare cases, even less.
But just because a condo will accept financing above 80% does not mean the prospective buyer is in the clear.
Why 20% is the standard for a down payment in NYC
Twenty percent remains the standard because it suggests the buyer is less likely to default on monthly mortgage payments. Someone offering $120,000 as a down payment on a $600,000 condo signals they are ready to invest in a property and have the wherewithal to keep it.
The main party of concern here is the lender, who does not want to be on the hook for a default. Even when condos themselves do not require 20%, then, a lender is likely to require it to be confident the buyer will pay their mortgage.
The lender may require that the buyer purchase private home insurance if their down payment is less than 20%. This form of insurance protects the lender in the event of a foreclosure. Lenders require it because a smaller down payment signals a riskier loan.
Why some NYC condos accept less than 20%
Some developers may accept down payments of less than 20% to fuel demand in a soft market. In the COVID-driven economic downturn, for example, some NYC new developments advertised that they would accept financing greater than 80%.
When condos say they will accept less than 20% for a down payment, it is probably a signal that they have existing relationships with lenders who are confident in the building and may be willing to lend to someone with less money up front.
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Condos versus co-ops
Co-ops generally maintain stricter financing requirements than condos. Co-ops will often have a board-level minimum financing requirement, whereas this is rarer for condos.
Ultimately, condos want to make sure the buyer can get a loan. So, if they refuse buyers who cannot put down 20%, it is likely because they do not want to waste their time negotiating with buyers unlikely to secure a loan.
The economy can affect down payments
Down payment requirements tend to get stricter during economic downturns. This is because lenders fear defaults more in a recession or tough job market.
Special programs for small down payments
There are government programs that allow people to buy homes with smaller down payments. For example, Federal Housing Administration loans help people with lower credit scores and incomes purchase homes with a down payment as small as 3.5%. But there is not much FHA-compliant inventory, and there are limits on loan size, narrowing the applicability of FHA loans to NYC condos, especially new developments.
The city also maintains some programs to help out first-time buyers, such as the HomeFirst Down Payment Assistance program. Again, the eligibility requirements are numerous, so this will not apply to most buyers.
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The photo above is courtesy of 90 Lexington Ave.