Co-op mortgages often have different guidelines and requirements than traditional mortgages. Co-op buildings are prevalent in the Tri-state Area, especially in New York City. Headquartered in NYC for over 31 years, GuardHill is one of New York’s best co-op mortgage specialists.
What is a Co-op?
A co-op (also referred to as a housing cooperative) is a type of residential housing in which a cooperative group or corporation owns the real estate building(s) and sells shares (units) to the residents of the community. A co-op resident does not own the unit they live in. Instead, they own shares in the corporation that owns the building(s), which grants you access to live in the unit you wish to purchase. Co-ops are typically more prevalent in cities with a higher cost of living, such as New York City.
How Does a Co-op Work?
Co-ops are made up of a corporation, shareholders, and a co-op board. The building itself is referred to as a cooperation. Shareholders are people who live in the building and own shares of the corporation. All shareholders are responsible for the building’s maintenance fees, property taxes, and common areas. Shareholders also vote on important decisions, such as building updates, so typically, those who own larger apartments are granted more shares and have greater voting power. The co-op board is made up of elected shareholders. The board has set meetings and often is responsible for the building’s long-term maintenance and financials. Additionally, the co-op board has influence over which people may purchase or refinance in the building.
What’s the Difference Between a Co-op vs. Condo?
A co-op typically attracts more permanent, long-term residents since the corporation enforces stricter guidelines regarding subletting, renovations, and more. The biggest difference between a co-op and a condo is that co-op owners don’t own the physical property or land. When you purchase a condo, you are purchasing the property and have full ownership. The mortgage process for a co-op vs. condo may vary slightly since co-ops require a board approval process, whereas condos do not. If the co-op board does not approve you, you may not be eligible for mortgage financing. However, since all the co-op residents are selected and approved to live there, there may be a stronger sense of community than in a condo building.
What are the Co-op Mortgage Requirements?
There are some additional requirements to purchase a co-op unit.
Complete a Co-op board application
The application may ask questions about your employment and income and reasons for living in the building.
Complete a Co-op board interview
The Co-op board interview will help the board determine if you are a good fit to live in the community. The interview may be in person or via a video conference.
Submit Character References
These references are written letters from people in your personal and professional network. They help the Co-op board better understand your personality.
Submit Financial Documents
The Co-op board will review your employment history and income documents, as well as your credit and asset information. Review which documents you may need for a mortgage pre-approval to better prepare! The board will want to ensure that you have a steady job with a stable income and have enough assets to afford the unit’s payments.
What are the Beginning Steps in the Co-op Financing Process?
Although the steps may vary depending on the Co-op board’s specific requirements and the lender’s guidelines, the following are the most common steps in getting a mortgage for a co-op unit. If you are considering a mortgage refinance for your co-op unit, some of the following steps may still apply.
1.) Get Pre-Approved
- Speak with a mortgage lender to determine what you can afford. This will help you narrow down your property search and make you appear a more competitive buyer. Use our mortgage amortization calculator to help you visualize which monthly mortgage payments may fit within your desired budget.
2.) Find a Property
- Search for Co-op buildings in your desired location. We recommend working with a realtor who has experience in the Co-op market.
3.) Begin the Co-op Board Application and Interview Process
- As mentioned above, you will need to complete a board application and interview to see if you are the community’s right fit. Once you are approved, you may continue to the next step.
4.) Complete your Co-op Loan
- Similar to how the Co-op board must approve you, the mortgage lender must approve the Co-op building itself. The lender will contact the building’s managing agent to request necessary financial information to review the building’s economic history and strength.
Why Choose GuardHill?
GuardHill has over 31 years of mortgage financing experience and specializes in providing standard and out-of-the-box financing solutions for our customers. GuardHill works with numerous investors and lenders and offers various loan programs to provide borrowers with the best financing solutions possible.