Since I sell so many co-ops and condos I am always faced with the statement, "I'm not sure if I should buy a co--op or a condo."Â The fact is, these two types of properties are very different when you go down the list of qualifications to purchase.
Most people don't have a choice between the two because of the requirements for each. Below I will share with you what I share with my buyers when they make that statement.
BASIC QUALIFICATIONS FOR PURCHASING A CO-OP
Below is an example of someone wanting to buy a two bedroom unit, but doesn't know if they meet the requirements to buy a co-op or a condo:Â
- Price - The price of a co-op is usually much less than a condo and your mortgage will automatically be lower than a condo in the same area. So if your're mortgage brokerÂ pre-approves you for a two bedroom co-op ranging from $200,000 to $225,000 then you cannot go out and get aÂ two bedroom condoÂ that would most likely beÂ $299,000 to $350,000, unless you plan to put down aÂ HUGE down payment so your loan amount is less.
Â - Down Payment - Most co-op buildings require at least 10% down when the contract is signedÂ (for example - ifÂ the buyer has an accepted offer ofÂ $200,000, 10% of that will be $20,000 for the down payment. This amount is required no matter what your lawyer or mortgage broker tells you because the co-op board or sponsor will not let the deal go forward.
- Credit Score - Your credit score should be at least 680 or higher for the bank and the board to accept you at the same time.
- Income - If the buyer needs a two bedroom, to purchase a co-op the buyer will need to earn at least $80,0000. All the income must be verified with stubs and tax information.
- 1st Time Home Buyer Programs For Co-ops - First of all, there is no FHA loan for co-ops, just a conventional loan. But there are governmentÂ programs that will give first time home buyers a grant and it can be combined with the governments FREE $8,000 tax credit given to first time home buyers for 2009 only (FOR MORE INFORMATION CALL ME TODAY, TAX CREDIT ENDS DECEMBER 1, 2009).
~~BASIC QUALIFICATIONS TO PURCHASE A CONDO
Example: Based on a buyer needing a two bedroom unit.
-Price - IfÂ you look at co-ops and condos in the areas you are interested in, you will see that the cost is much higher for the same amount of bedrooms. A two bedroom unit in a middle income neighborhood in Brooklyn would be around $300,000 to $350,000 or even more. If your mortgage broker says you qualify for much less then a condo is not an option right now unless you are putting down a large down payment to lessen how much you're borrowing from the bank.
-Down Payment - The good thing is, condos are FHA approved, that means you can put down as little as 3 1/2% (example:a two bedroom condo for $300,000 x 3.5%=$10,500 asÂ the down payment). Also,Â some banksÂ offer down payment and closing cost options for first time home buyers.
-Credit Score - If you qualify for an FHA loan, your credit score has to be a minium of 640 (since I last reviewed FHA regulations they went up on the credit score requirements).
-Income - The income for a condo must be higher if your putting down the standard down payment because your loan amount will be much larger than if you were purchasing a co-op.
-1st Time Home Buyer Options - For condos there are government grants and bank programs that will assist you with closing costs and or the down payment.
As a buyer looking into purchasing a co-op or a condo you should look at the two scenarios above very carefully. Looking at the requirements for each, it's pretty easy to know up front which one a youÂ qualify for.Â
If you have any further questions about this article feel free to give me a call at 646-725-5941.Â
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Full Time Licensed Real EstateÂ Professional
Specializing In Co-ops andÂ Home Sales
Weichert Realtors, H.P Greenfield
www.kandHhomes.com (site isÂ having maintenance done, will be up by Tuesday 4/28/09)