Is financing for a coop different than condo or house? Do you still take out a bank loan as for any other type of property?

Asked by Karen, Union City, NJ Sun Mar 28, 2010

I'm puzzled by income-restricted coops with a pretty huge asking price - is there a special type of financing for coops?

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First Last, , 90002
Mon Mar 29, 2010
I assume you are asking about New York City? If so, you should know that NYC is unique and most of the information from out-of-state responders could be incorrect.

Yes, to purchase a cooperative you take out a loan just as you would for any other property. Wells Fargo, Citibank, Chase, etc. etc. all provide loans for this purpose--all the time, every day. This is totally routine in the New York City area.

Co-op income requirements are imposed not by the lenders, but by the co-op boards. These are residents who govern the building. They have great leeway in setting up requirements. They can require a certain down payment percentage, or require all-cash purchasing only, or require that you have $X in assets. They can also reject people because of celebrity status; Richard Nixon was famously rejected by a co-op near Central Park, and there are other examples that surface in the gossip pages from time to time.

You may be asking about co-op units that are relatively rare, and that are found on the Lower East Side and Harlem, in my experience. The unit could have a selling price of $400,000+, say, and a family income limit of $90,000 imposed by the co-op board.

These income restrictions/limits are usually a legacy of how the property was developed, the philosophy and incentives in place at that time, and they tend to go away with time. Usually the idea was to prevent rich people from buying into the co-op, sort of the reverse of the situation you'll fine in the most exclusive co-ops near Central Park.

Unfortunately, to buy in such a unit, a buyer may need to have a lot of cash on hand for an unusually large down payment, and then the buyer can get a loan as described above. Any restriction as to who can buy into a building tends to hold down selling prices.

Karla Harby
Licensed Real Estate Salesperson
Charles Rutenberg Realty, LLC
New York, NY 10021
2 votes
Michael Rich…, , New York, NY
Fri Apr 2, 2010
Yes, you can still get financing from a lender if you need it unless you a buying in to a very high end coop that does not allow financing. When you do get a loan it is a personal loan not a mortgage because you are purchasing shares in a corporation that owns the real estate as opposed to purchasing the real estate when you buy a house or condo, This changes the underwriting a bit, but you probably won't notice the difference.

By income restricted coop I assume you are referring to coops sponsored by housing development fund corporations. These are formerly distressed properties that were taken over by New York City, usually through tax foreclosure, and transferred to non-profit organizations to rehabilitate. Since the city subsidizes the rehabilitation, the policy is to make it affordable, for New York City, to stabilize the community. Though the price tags may seem high to you, they are actually well under what similar properties sell for at market rate.
0 votes
Rand Miller, , Northport, NY
Tue Mar 30, 2010
Good comments already, but keep in mind, if you are purchasing a coop, yes only certain lenders lend on coops, in fact we have a stated income program that works on coops, but the coop boards usually decline a stated income buyer. Also, once you own a coop even if it is free/clear with no loan, many times the coop board will not allow you to cashout refi. Condos are easier because you are the owner and don't have to worry about a board restricting or preventing you from financing even though the lender will approve your financing request.

Best wishes to you.
0 votes
Tony Lara, , New York, NY
Mon Mar 29, 2010
Hi Karne, I grew up in Weekhawken (small world). Financing for a co-op is the same as purchasing a condo with the exception that as a buyer you’re not paying the high closing cost that you would when purchasing a condo. A good mortgage broker can certainly assist and If I may put in a plug for Patricia Lavigne of Manhattan Mortgage. She’s at 212-745-9012 or All of my clients have been very happy with her and in full disclosure I do not receive anything for Pat she’s a good broker that I work well with.

Regarding the income restriction if you’re referring to buildings that offer HDFC loans that’s correct. In order to qualify the buyer can only make a certain amount of money to qualify for the unit.

If you’re referring to the co-op boards stating that a buyer can only contribute 25-30% of their income (debt to income ratio) to the maintenance & mortgage that’s correct. If the unit cost $900,000 and the board states you can only contribute 25% of your income towards your monthly payments it’s to safe guard the building from tenants that might be financially stronger. The co-op boards don’t want you to spend more then a certain % of your income that can make a co-op a tough choice but it’s doable.

Licensed Real Estate Salesperson*
Charles Rutenberg Realty, LLC*
New York, NY 10021
0 votes
Anna M Brocco, Agent, Williston Park, NY
Mon Mar 29, 2010
As for the financing aspect of it, the process is similar to any other loan. Keep in mind that when purchasing a co-op, just because you may qualify for the mortgage does not necessarily mean you will meet Board requirements--these requirements do vary from complex to complex--such as money down, percentage of debt to income ratio, salary requirements, etc. Your agent can advise you best on any of the complexes and requirements, etc., and your loan officer will advise you best as far as financing.
0 votes
Mitchell Hall, Agent, New York, NY
Mon Mar 29, 2010
While the process may be similar for obtaining financing in a coop or condo technically there is a difference. In a coop it is not a mortgage but rather a coop loan. Coops are not real property since you are purchasing shares in a corporation rather than purchasing real estate. The coop has the first lien on the property. The lender is second. Currently when you finance a coop you are exempt from NY state mortgage recording tax. However, the Governor is trying to impose that tax on coops as well.

Most coops that have income restrictions are HDFC coops. They are "affordable housing" subsidized by NYC. Usually the asking price is below market. Many are "limited equity" coops. The city subsidizes a portion in return for the coop maintaining affordability. If you sell before a certain time period 10-30 years there is usually a flip tax. A portion of your profit goes back to the coop and you have to sell to a buyer that fits the income restrictions.

Mitchell Hall
Associate Broker
The Corcoran Group
Web Reference:
0 votes
carol friedm…, Agent, New York, NY
Mon Mar 29, 2010
The process is pretty much the same for condos or coop. the difference in a coop is that you own shares in the coop and receive a prioritory lease ,with a condo purchase you own the condo. as far as banking there are slightly different closing fees, also with most not all coops require larger down payments then condo. The loan process is the same process for condo and coop. checked bank rates with major banks and mortgage companies rates may vary. you also may want to find out what lending institutions have already lend money in the building you are interested in . good luck carol friedman nestseekers international
0 votes
Don Tepper, Agent, Burke, VA
Mon Mar 29, 2010
Yes. Financing is different.

In a condo, you're actually financing the purchase of shares in the cooperative, not the financing of the purchase of the property itself.

Most lenders don't lend on coops. Usually, a coop will have a small list of lenders who've agreed to lend on that specific coop. In those cases, you are able to take out a loan to purchase. But you can't just walk into any lender (as you could if buying a condo) and get a loan.

Hope that helps.
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