Buying from a Sponsor - Avoiding 20% Down

One of the things that I hear a lot from relative newbies in the neighborhood (and yes, I'm included in the newbies) is that they would love some cooler places to eat, shop and drink BUT are nervous rents and purchasing prices of apartments will soar with the introduction of these places. A nice thing about Kensington is rents and apartment prices are still relatively affordable (although a little higher then amNY quoted) which was a major draw for me, and maybe some of you. While I'm not an expert I think apartment prices have come down a bit in the last year and because of the benefits and abudance of places I keep suggesting to those who rent to buy. When I make this suggestion I repeatedly hear the same thing, people can't afford what they expect will be a 20% down payment. While 20% is certaintly the norm in NYC I know a lot of my neighbors have bought through the sponsor and been able to avoid putting down the entire 20%. Typically unheard of in NYC I think it's still pretty doable in the neighborhood so here's what I would suggest (and please comment with information).

1. Get pre-approved for a mortgage just to be sure you actually have the ability to get one. (Please make sure it's a reputable company, no sub-prime craziness but if you don't have good credit you may be outta luck. The first place to try is always your bank and ask for the typical 30 year fixed for a co-op since the rate, type and lender of loan can change once you actually put in a bid).
2. Many buildings (especially along Ocean Pkwy) have co-op signs with a telephone number and usually this number is to the company which manages the building for the owner and members of the co-op. The management company typically (and not always) has an understanding of the rental properities and if the owner is willing to sell to individuals. Regardlesss, ask the management company if there are any properties for sale in the building. Ask what other buildings they manage and about properties for sale there. Ask who is the real estate agent for the owner of the building. And in this calling be dilagent and patient usually apartments become available when a renter moves so one day a building with no vacancies could have a few. You also may be in luck if you rent a property in one of these buildings currently... call the company you send your check to and ask if you could buy the place!
3. Finally two points of caution...
3a. When buying without a full 20% down usually the mortgage company requires you pay a small fee on top of your montly payment called the PMI. Usually in a year or two when the price of the apartment increases you can get it appraised for the new selling price and the PMI is dismissed.
3b. Also even if you can't do a full 20% you'll want to put something down and have enough cash for closing fees which can run a few thousand dollars since you'll need a lawyer and appraisels etc.

(Please note I am no expert! This advice comes from experiences of friends but it should only be seen as advice! Lastly, (more advice) never take on a mortgage you can not afford and get an understanding of the mortgage you're signing up for before buying.)

Ok and before I get a million comments I'm not saying everyone should buy, I'm simply making a suggestion especially for those (and I know a lot of these people) who've already lived in the neighborhood for a bunch of years and are committed to staying. This post should simply be seen as advice for people who WANT to buy but don't think they can because they don't have the entire 20% in the bank plus fees.

Here's the NYTimes article 'A Word of Advice During a Housing Slump: Rent'
Brownstoner has a great post on this article today. Oh, Inverted World