(Originally published November 26, 2009.)
Coops are a unique form of homeownership, prevalent in New York City and certain communities throughout Long Island. With coops, the “homeowner” does not actually own the property. Instead, the building is owned by a cooperative corporation and the “homeowner” owns shares in that corporation. Each unit has designated shares. Although these homeowners don’t truly own real estate, they still enjoy, with minor differences, all of the benefits of traditional homeownership.
When purchasing a coop, prospective buyers should be aware of two potentially major obstacles:
The Coop Board – You’ve found a coop apartment and you love it. But unless the coop board loves you too, your purchase is dead in the water. Most coop bi-laws have minimum down payment, credit, and net worth requirements for all prospective buyers. In addition, they require that prospective buyers be interviewed and approved by their coop board, before granting permission to move in.
The Mortgage Financing – With the implosion of the sub-prime mortgage industry, FHA lending has become more popular over the past two years. However, FHA loans are not available to coops. In addition, most lenders won’t grant loans greater than $729,650, which leaves much of Manhattan’s multi-million dollar coop market out in the cold. (Fear not – I’m still closing multi-million dollar coop loans.)
BEFORE you consider purchasing a coop (or any property for that matter), it’s critical that you prepare.
Find a QUALIFIED Realtor who knows the neighborhoods you desire and is familiar with the requirements and personalities of the local coop market. A qualified realtor will help you find the right coop that fits your needs and finances.
Meet with a QUALIFIED Mortgage Planner before you begin your search. A qualified mortgage planner will have the loan products to meet your needs and the knowledge and experience to make it all happen. He will perform a complete and thorough financial and credit analysis. He will uncover potential issues and help you correct them before they become detrimental to your home purchase.
Coop financing is still available for loan amounts well into the seven figures. But having the loan products is only half the story. You need to work with someone who knows how to make these loans work for you.
Since 1992, Warren Goldberg has helped thousands of clients own their homes, refinance their mortgages, restructure their debts, and invest in real estate. Warren is known for his wide knowledge of mortgage products and wealth-creation strategies.