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In this video, Chelsea shares everything about her first home-buying experience here in NYC — from what she spent to the annoying realities of the closing process.

NYC median home cost: https://www.propertyshark.com/mason/market-trends/residential/nyc-all

Co-ops: https://www.quickenloans.com/learn/what-is-a-co-op

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Hey, guys.

It's Chelsea, from The Financial Diet. And if you haven't already, please go ahead and click that Subscribe button right below, and go ahead and click that Join button to find out all about our secret society here at TFD.

And today, for those of you who are familiar with the channel, you may notice that I am in a different space. Welcome to my home. I own it.

Also, my home is not quite finished yet, but I would like to apologize for the sticker you can see on the back of this credenza. I forgot to buy Goo Gone. Know that it hurts me more than it hurts you.

So yes, as some of you who follow me, for example, on social media might be aware, one of my big kind of journeys this year has been one of buying a home. And because of what we talk about here on TFD, and because of my overall commitment to financial transparency, and transparency around these big financial decisions, I wanted to commit to making a video where I talk about the nitty gritty of the process and share as much as I can in terms of insight with you. I want to make one quick disclaimer up front before I get into some of the details, because I am going to share numbers here.

And the cat's out of the bag. I live in Manhattan. It's expensive here.

I earn a lot of money. My husband earns a lot of money. I own a successful business.

So if we're eating the rich, honey, break out your knife and fork. No, but in all seriousness, the numbers that I'm working with may not be equivalent to your budget. But at the end of the day, I'm here to share my experience and be honest about it.

Not necessarily saying it will be the exact same for everyone. But if you guys are ready to get out your pitchforks and guillotines, get thee to the comment section, have at it. I'll get into this, but we still purchased our home for under the median home price in New York City.

There are some real billionaire capitalist class people that we need to go for. Also, lastly, I make the fifth most at my company, or maybe the sixth most, because I'm not here trying to take it all for myself. I live my principles.

I practice what I preach. Don't come for me that hard. I mean, come for me, but within reason.

So first and foremost, why I bought an apartment. So a lot of people, when I posted about the fact that we own this apartment-- and I really didn't post anything until it was secured in the bag, because, as I'll address later, there is a lot that can go wrong between when you make an offer that's accepted on a home and when you actually own it. But when I did post, a lot of people were quick to point out that I have said in previous videos that I did not think I would be a homeowner, and that's true.

For a long time, mathematically, the price of buying a home in New York City, plus the financial situation that I had at the time, plus what the equivalent rent might have been, just did not make it a reasonable financial calculation for my husband and I. But then something happened last year that you may or may not have heard of. We were thrown into a global pandemic.

And basically New York City was evacuated by all of its wealthy people. And everyone on the pages of the Wall Street Journal and the New York Post were writing op-eds about how New York City is dead forever. And therefore, the real estate market took a huge hit here.

And so a lot of the places that my husband and I would have been interested in were suddenly literally hundreds of thousands of dollars less than they would have been pre-COVID. And that is combined with some of the rock-bottom interest rates that we were seeing on mortgages, in part in an effort to stimulate that economy that was really hurt by COVID. And your girl did lock in her 2.875%.

But basically it made for a confluence of factors that made buying a property in New York City a once in a possibly decade opportunity for my husband and I. And we know we want to be here long haul, so it just made sense. And now all of that said-- if, again, you do follow me-- you might be aware that my husband was in a bit of an immigration limbo over the past 18 months and mostly living out of the country by necessity.

So that did make it a not totally ideal time for us to buy a home. And if all of those other factors weren't a consideration, we probably still would not have purchased this year. But we decided that the unique opportunity, if the right unit came along, outweighed the fact that because he was out of the country, I would have to seek the mortgage totally alone.

So my first step was to set up a feed. I started it probably at the beginning of this year, to really just sort of passively, every morning, check all of the listings in my target neighborhood to see what was happening in the market. My husband and I have lived in the area for about five years now, so we were very familiar with it.

We knew a lot about the inventory. We knew what was and wasn't a good deal, really block by block. We kind of knew what's going on, but I also had my criteria.

And this is something that I would highly recommend doing, is really set up a feed. You can get a few different real estate websites into it. You can do an RSS feed, like I did.

I'm sure there are other ways to do it, but point being, just get every morning a passive stream of information of what's available. My criteria is that I wanted prewar. Your girl loves her moldings and her period details.

I needed extremely good light. I wanted at least two bedrooms. I wanted in our preferred neighborhood with good schools immediately in the area.

Although my husband and I do not plan on having kids, it's very important for resale. But more on that later. And of course, I wanted a building that was really well run logistically, and financially, and even aesthetically.

Because when you're buying an apartment and not a stand-alone house, the rest of the building has a lot of impact on the value and the just day-to-day lifestyle of being in that apartment. So I had my feed together, and every morning I would just wake up and check and see what was happening. And I set myself the bar of I will only go see something in person if it is an absolute, like, unless there's something really misleading about this listing, I could make an offer on it today.

And that, of course, also meant that it had to be within our budget. Now this is where the pitchforks come. Now our budget was $800,000.

And yes, that is a lot. It is also only marginally higher than the current median sale price in New York City, which is about $765,000 as of this quarter. And it also, for a two-bedroom apartment, might seem ridiculous to someone who could buy multiple mansions in the part of the country where they live for that same amount of money.

Apples and oranges. I like to live in a big city. I don't plan on having kids.

I don't mind the small space. I like all of the accessibility, and the culture, and the lifestyle that living in New York City affords me. It's a worthy trade-off.

You do you, I do me. And how were we able to afford that? There's really no secret.

My husband and I are both high earners. I own a successful business. And we also don't have debt.

He's French, so school is free, because it's a civilized country. I went to a community college and dropped out. So all of that said, our budget was up to $800 K, and the goal was to make sure that our monthly expenses did not far exceed what we were paying in rent, which, at the time, was about $3250 a month, which is, again, really high.

So we ended up paying $752,000 for our home, which is actually slightly below what the listing price was. But importantly, it's about $125,000 less than what the value of the home would have been at that time, were it not for that COVID-induced dip in the market. Now that's an estimate, but that's based on things like historical trends and past sales, as well as neighborhood averages and specific factors unique to this apartment that I won't get into huge detail about, because I'm not trying to just blast my shit everywhere on the internet and have people out here finding me.

But suffice to say, there were a lot of criteria that made me feel pretty confidently that this home was seriously depressed in value, for basically temporary reasons, i.e. COVID, and therefore, a deal was there to be had. Now our goal was essentially to get as close as we could get to a financially sure investment.

Now that is never totally possible in real estate. But the fact that we had such high familiarity with the market and knew that we were paying such an artificially depressed price was a huge factor in getting us as close to that sure bet as we could realistically hope to get. Plus, once our down payment was out of the way, our monthly expenses are actually very close to what we were paying in our rent every month, between our mortgage, our taxes, and our fees for the co-op.

I'll talk a little bit more about what a cooperative is, but basically you pay fees into the building that help manage the building. So the nice part about that is that you don't necessarily have to do everything yourself as if you owned a stand-alone home or even some condos. There are people who work in the building, who help take care of things, can deal with minor repairs, cleaning, et cetera.

Now it should be stated that what was happening in New York was a pretty unique situation, where every suburb around the city had people frickin' knifing each other to pay $100,000 over asking and waive inspection on these homes that were, god knows, in what state. And New York was absolutely tanking, and everyone was talking about how it would never return. Surprise.

I think the rental market is actually back up higher than it was pre-COVID, so look at what happened there. But even though this was an extremely unique situation, what is not unique is the fact that I took it upon myself to be as informed as possible in the process so that I was not relying on the broker. Now let me be clear and say that sometimes working with a broker is necessary for people.

They don't have the time or energy to give to finding a bunch of units to go look at. But that can also be dangerous, because a broker, at the end of the day-- no offense, brokers-- is in it to make his or her commission. So they'll often be showing you things that they just think you might really want to buy or could be often way above your budget.

They're often going to nudge you into decisions that maybe, A, aren't quite right for your budget, or B, aren't the best long-term financial decision for you. You really have to know what you're doing in that respect and not outsource that research to what's happening in the market to someone else. Now I was an extreme case in that respect, but basically I had my search criteria going and just passively checking my feed every morning for about a total of nine months, more or less.

So it was all the time before I looked at this unit, and then between when we had an offer accepted on the unit, and when we actually took the keys, I still checked it every morning. This is actually the only apartment that I ever went to see in person. And during our 100-plus days in contract-- meaning while the actual home buying process was happening-- I never saw another unit online that I would have looked at.

Now the brokers of course-- because you have to go through a broker here-- when I went to see the apartment and obviously became in contact with that buyer's broker, they immediately, after I saw this unit, sent me a bunch of other units to look at. And I was like, OK, Drake voice, if this listing appears online. It's too late.

But basically I was like, I already know everything, so you're only going to show me things that aren't already on the market. But one of the good things to know about this situation is that it didn't really matter how much I used my broker, as far as getting my money's worth, because in our situation, the sellers actually paid both the buyer and seller's brokers, so we weren't actually paying for them. But either way, I was not going to rely on the broker to do the work for me.

So long story short, I went to go see the unit and basically, immediately, was like, we have to make an offer. And I knew that there were going to be a lot of offers. It actually so happened that there already was an offer when the unit had been on the market for 24 hours, which was very unusual, given the average closing time in our neighborhood.

But I knew that was going to be the case because of a lot of factors. Some of the factors that were really important for me-- yours might be different-- but it's really important to have a list of factors that you know this is going to be a good deal and the right unit for you. For me it was things like knowing that the building was a very good one to live in.

In our case, the people selling our unit were actually moving to another unit in the building, so that really spoke very highly to the quality of life. The building itself was very well run and very well maintained. The unit itself was in excellent quality.

There was a lot of potential upside with a few strategic changes that I knew I would be able to make. The quality of life in the area was very high. And also-- and this can be an underrated factor, but it's something to consider.

One of the things that I think a lot of people don't consider enough when buying a home is what is actually planned to happen in the rest of the area around you. Having some awareness about things like development plans and zoning laws in the area that you're buying into, especially in urban areas, is incredibly important to knowing what your home is going to be like in the neighborhood it's going to be in 5, 10, 20 years down the road, which seems far off but really will matter in the long run when it comes to a home valuation. I won't get into too much detail, again, to somewhat protect my privacy.

But given the location of my home, there's a ton of limitations around what kind of changes can be made, what things can be built. For example, you could buy a home that has a really beautiful view. And then a skyscraper gets built next to it, and you have to look at an alleyway for the rest of your life.

That can't happen where I live. So having that knowledge of zoning and what was likely to happen in terms of development over the next decades was very important in terms of making this choice. So we made our offer.

It was accepted in probably within a day, basically. And then that started the process of actually closing on the home, which was very straightforward, but it is what takes the longest amount of time. Ours took over 100 days, which is longer than usual but was compounded by the fact that, again, we're buying into a co-op.

Now just for context, a co-op, or a housing cooperative, is a type of housing owned by a corporation made up of the owners within the co-op. The corporation owns the interior, exterior, and all common areas of the building. And instead of buying property as you would in a traditional real estate transaction, you're buying shares of the corporation, or the co-op association, which controls the co-op, which entitles you to living space.

Co-ops are typically more common in crowded cities with a high cost of living, because they cost far less up front than condos or houses. However, they come with higher monthly maintenance fees and are most common in New York City. And in fact, co-ops in New York outnumber traditional condo units by a ratio of almost 3 to 1.

I won't derail here on all the ins and outs of a co-op. They're hotly debated. Some people like them.

Some people hate them. It was the right choice for us. But suffice to say, the process of getting accepted into a co-op, where in addition to being approved by the bank for a mortgage and approved by the seller, you need to be approved by the board of the co-op, that you're going to be a chill person to live with, and your vibes aren't off.

It added quite a lot of time and a lot of paperwork to the process. We had to give references. They were called.

We had an interview. It was like a whole thing. But suffice to say, the closing process took about 100 days.

And so one of the pieces of advice that I would give is to estimate that your closing process is going to probably take a lot longer than you think it will. And one thing to consider there is what your living situation is going to be. You don't want to overlap too much if you are renting a place like we were and then are going to eventually move into the place that you own, because you don't want to pay a bunch of rent for no reason.

But we actually just squeaked by and were able to move in just before our lease was up and someone else was moving into our unit. But if our closing process had taken any longer, we could have been [BLEEP] out of luck and having to live in an Airbnb or something and put all of our stuff in storage during that overlapping time. So that is an important thing to consider that we didn't necessarily know going in.

So after our offer had been accepted, the most important part was getting that mortgage. And so for those of you who may not be aware, a mortgage is essentially a loan you make from a bank that allows you to purchase the home, because most people don't have just hundreds of thousands of dollars lying around. We of course had to put our down payment in first.

Between the actual down payment itself, plus all of the closing costs-- a thing called a flip tax that we had to pay-- it ended up being about $230,000. Again pitchforks, guillotines, I get it. But the truth is, my husband and I are high earners.

We don't carry debt. And we have been living below our means for a long time now. For example, our rent in New York City essentially remained the same over the past eight years as our earnings and my company's financial stability greatly increased.

So making decisions like that allowed us to save that money and have that cash on hand. Your down payment might be different. The process of saving for it might be different, but that's what it looks like.

I should also mention that there are a lot of opportunities to buy a home for less than a 20% down payment. But in New York it is very, very difficult to do that. There are certain types of loans and certain types of homes that will allow you to buy with a lower down payment, but it's pretty rare here in the city.

But I will link you guys in the description to an explainer all about buying a home for less than that 20% down payment. But we did the traditional, a little above 20% actually, and therefore the rest was a mortgage. The approval process for the mortgage was pretty straightforward, but the most important criteria that they looked at-- and again, I should note, I had to get the mortgage entirely by myself, because my husband was not currently a permanent resident of the US.

It will be easier for you if you're buying it with another person, because you have two people's finances to consider and two incomes to consider. But I had to go it alone, and these are the criteria that they used. My good credit score, currently rocking with that smooth 753 as we speak.

Stable income, which is actually kind of annoying to prove when you have your own company-- I was basically writing my own employment letters-- good debt to income ratio, and these things not changing in the time between your mortgage approval and the actual loan being signed. And this is extremely important. You can't lose your job.

Your credit score can't change. All of the things that allow you to get approved for that mortgage need to be cleared and exactly the same when you actually are sitting there signing all the bank papers. Otherwise those underwriters will come for your ass, and you will get that mortgage approval revoked.

So for context also, my salary is $90,000 a year, and my mortgage payment every month comes out to about $2,400. I have to double check exactly what it is. But suffice it to say, it is a higher portion of my monthly take-home pay than banks typically like to approve.

So I also had to provide all of my company's finances in order to basically further ensure that I had a ton of stability and my job wasn't going anywhere anytime soon. They definitely did a little bit more vetting on me than they might do on you, because I was really kind of squeaking by, in terms of the amount that they would approve for my salary. But that's how it worked for me.

And for most people the approval process will be some version of that and may actually be easier if you have a more typical form of employment. So that was really what was involved in getting approved for my mortgage. Again, your mileage is going to vary, but the mortgage does usually represent the vast majority of what you're going to be actually paying for the home.

So it is a really important thing to consider. There are of course, as I mentioned, other closing costs associated beyond just your down payment. In our case, that was things like the flip tax that we had to pay, our lawyer who led us through the process and was the person who actually inspected all of the financials and the history of the building, and there were other things here and there.

And of course, there was the actual cost of moving and the limited renovations that went into just moving in. Overall, the takeaway was definitely that the process of getting into the home is almost always more expensive than you think it's going to be. So definitely doing less than you can afford, so that you're not left in the position of having to scramble to actually find the cash to get into the building, is crucial.

Also one thing that's very important to consider about a mortgage that I did not when I was initially buying is that ultimately what your bank is willing to pay for your home depends more on their appraisal of your home's value than whatever the seller is happening to charge. And usually they do line up pretty well, although we did hear several stories of banks way undervaluing a home in New York City that otherwise was objectively worth a lot more. That is something that can go a little wrong.

Our appraisal actually came in a little bit higher than the seller's ask, because your girl can spot a deal. But it is important to remember that you can't just get a mortgage for whatever you think the house is worth. The bank has to actually agree with you that it's worth that.

Again, in our case, it didn't really become a factor. But for example, if you're in one of those crazy bidding wars out in like Montclair, New Jersey, or Westchester, where everyone moved to out of New York City, and you're trying to pay hundreds of thousands of over asking, that could really put you in a bind. Because likely a bank is not going to agree to it, even if the seller and you do.

Now I should clarify that, of course, having bought a home, even in a relatively competitive market, doesn't make me some kind of an expert on real estate. I'm not. I think that I did as good a job as I could possibly have hoped to do in my time in New York.

But lots can happen outside of my control or my ability to predict. And in real estate nothing's ever sure. And again, I'm no expert.

And what your situation in your market and with your financials might be is going to be totally different than what mine was. But as far as what I learned and what I think applies to basically everyone in this process, there are a few key things that I do want to share. So buying a home should be as close to an objective good deal as you can get.

You shouldn't be doing it just because you think you should be a homeowner, or someone else thinks that, i.e. your parents. Again, I have to reiterate that if COVID didn't happen, we likely would not have bought a New York City. We bought because it was the right time to make a good investment.

Feeling like you should buy because you're "at that time in your life" and therefore buying something that's not necessarily a good financial investment when you consider multiple market factors, and the rental market, and how long you're planning to stay in that area, et cetera, is a terrible decision. It's important to remember that for most of us, buying your primary residence is going to be, first and foremost, one of the biggest financial decisions you make in your life. It shouldn't be made for anything less than solid financial reasons.

Secondly, as I mentioned, it is almost always more expensive than you think it's going to be. Those closing costs add up. It's expensive to move.

You may have to pay for two living spaces at once in a while you go through the actual process of closing and buying. It is very important to leave a big buffer in what you think you can afford. And again, when it comes to those brokers, they are often going to show you things outside of your budget I very clearly said to my broker after I met them, our budget is $800,000.

We received several listings over $1 million. Do not let your budget get away from you, no matter how much you think you might love something. And actually on that note, never even look online at things that are outside of your budget.

Because all of the sudden the things that are in your budget are going to seem terrible, and you're going to put yourself on that hamster wheel of justifying why you need just a little bit more you can afford. Go under what you can afford, because it's going to be more expensive than you think to close, and you don't want to be cash poor because you bought at the very top of your budget. Thirdly, not everyone is going to take it as intensely as I did.

But try to take it very seriously to learn about the market that you're buying in. What was happening in New York during COVID was a very, very unique situation. And I knew enough about it and about the specific neighborhood that we were buying in to really make an informed decision.

But it is important that you understand both the national trends that you're looking at-- obviously things like interest rate on your mortgage are a big factor there. And it's also important to understand the local trends of what you're looking into. Your ability to spot what is a good deal or what is a great value in a home is going to be largely predicated on your understanding of your market.

So being as informed as possible will really help reinforce the financial savviness of that decision. And again, going against the grain is always helpful. A lot of people really overpaid for homes in the past two years because there was a craze of people buying in secondary markets in suburbs during the peak of COVID.

I'm not going to say that's a universally bad decision. Some people can afford to do it. But for a lot of people, that is a bad decision financially, or at least an unnecessary one.

And that brings me to my next insight, which is that home buying is almost always a long-term financial decision. You should not be doing it based on short-term needs, or trends, or anxieties. Yes, things seemed pretty frickin' bleak for New York City in March of last year, but now things have pretty much totally reversed in terms of the trends.

And who knows how much more it will do so, when we have 5, 10 years in the bank in this place. Which brings me to my next insight, which is that for most of us, your primary residence is going to be a place you need to live in for at least 5 to 10 years in order to really see returns on that investment, or in some cases to even ensure that you're going to break even when everything is considered. So part of being sure that it's a good financial decision is being sure that you're OK, or even able, to stay in that place if necessary.

That means things like, do you plan on expanding your family in the coming years? Or possibly looking into changing jobs? Or having to move for other personal reasons?

If you can't guarantee that in the case of needing to financially you can stay in that unit, you probably shouldn't buy it. And that's also why it's important to remember that this is as much about you vetting the unit as the seller choosing you. That means that you deserve to be picky, to set standards, to ask questions.

You never waive inspections. You never waive your rights. You always do everything you can in due diligence to make sure this is the right deal for you.

And again, with the brokers wanting to be pushy or possibly extending you over your budget, they don't have to live in the unit. You do. They might be quick to waive away all of the extra questions you might want to ask.

Don't let them. You have to be totally positive that this is the right unit for you personally as it is financially. But on that note, it is important to remember that just because you are the person buying it, doesn't mean that the person you may one day sell it to is exactly like you.

So for example, we don't plan on having children, but having good schools in the area was very important. It's a two-bedroom. A family might live here, meaning that schools are going to be of importance to them.

Considering the factors that make your home a good resale to a wide potential audience of buyers is just as important as making sure it fits your needs. Lastly-- and I think this is very important for everyone to remember, especially as we age into my age bracket, early 30s, and are starting to ask a lot of questions about adulthood, and where we are in our lives-- remember that being a homeowner doesn't mean anything about you other than the fact that you own a home. Plenty of people own homes, and it's a terrible financial decision for them, or they can't afford it, or it's preventing them from being able to make other life decisions they want to make.

A lot of us grew up with parents who really wanted us to buy homes or told us how renting was universally throwing our money away, even though in certain markets that literally doesn't make mathematical sense. Home ownership can be an amazing financial decision and help build long-term wealth. But it is not universally the right one, and it should never be anything you do because you feel like you're in that stage of your life, or you want to think of yourself a certain way.

It's not a character building exercise. It doesn't have moral value. It's just owning a piece of property.

I love it. I love being a homeowner. But honestly, if this were a rental unit that I found, I would still love it, and I would still get a lot of the quality of life that I do from owning it.

It doesn't change who I am, and it doesn't change the rest of our financial goals and the way we live our lives. It was a big step for me personally, and one that I'm happy to share with you guys on a financial and just a personal level. But that doesn't mean it's right for you.

So rest assured, if you're 30 and still don't own a home, I was, and I was still amazing. Anyway guys, that's it from my new home. Thanks for watching as always.

And don't forget to hit the Subscribe button and to come back every Monday, Tuesday and Thursday for new and awesome videos. See you.