Well, that's one solution...

Crain's New York Business notes that (I don't know if the link is for subscribers only:

NY allows loans for financing closing costs

Mortgage guarantee insurers can now write policies up to 103% of the value of real estate in New York to enable closing costs to be financed, under a new law aimed at encouraging home ownership.

The law, recently signed by Gov. Pataki, stipulates that any insurance written above 100% of the property’s value can be used to finance fees and closing costs.

New York joins more than 40 states that allow loans for financed closing costs. The refinancing craze of the last few years, sparked by dropping interest rates, made New York’s previous 100% limit “stick out like a sore thumb,” says Bernard Bourdeau, president of the New York Insurance Association. “This brings us into the 21st century.”

I don't have a problem with increasing the limit -- people should be permitted to finance whatever they feel like financing and I'd repeal the limit, in fact.

But one of the major costs of financing is the mortgage recording tax, which can, in commercial financings in NYC, cost up to 2.75% of new money advanced as a loan secured by a mortgage. It's slightly less in the context of a residential deal, but if the state really wanted to "encourage home ownership," reducing or eliminating the mortgage recording tax would be a great start. Most states do not have such taxes and they constitute a significant restriction on development.