Looking at my first deal

[Martin Mangan]

Hi all,

I've been looking at a house for a few weeks now. I've expressed interest, and toured the property. I haven't put in an offer yet. I have two questions. 

First, I was initially planning on putting down 5% and house hacking. I was informed I should be eligible for the NYS Home grant. Should I plan on putting this money into a greater downpayment to make the deal cashflow a little better, or should I use it to save some of my own money for vacancy and cosmetic refub?

Second, I'm at the point now where my agent will be asking the sellers agent questions, and acquiring any disclosures. Are there any questions I should ask in particular? The house is a 3 bed 2 bath with unfinished attic and basement, built in 1900's in NY.

Thank you,

Martin

[Masoud Arouni]

@Martin Mangan — Jackie's right on reserves over down payment. Here's the math to make it concrete for your decision:

On a 5% vs 10% down comparison at say $400k purchase:

5% down, loan $380k at 7%: PITI roughly $2,800/month 10% down, loan $360k at 7%: PITI roughly $2,650/month

That's $150/month difference. One plumbing call on a 1900s house costs that back in under an hour.

On house hacking specifically — your underwriting math is different from a pure rental. You're living in one unit so model it this way:

• What does the rental portion cover toward your total PITI?
• What is your effective monthly housing cost after rental income?
• Is that lower than what you'd pay renting elsewhere?

If yes on that last question, you're winning even if the deal doesn't fully cash flow on paper.

One question which has not been mentioned yet for a 1900s NY home — ask for the boiler age and last service record. Steam heat systems in older Westchester homes run $8-15k to replace and insurance carriers are increasingly flagging them. Don't let it be a surprise in January.