- When buying a coop, you are actually purchasing shares in a corporation that owns the building and property.
- Your shares are directly connected to the unit you are buying.
- When buying a condominium or home you own the home or ‘real property.
- Buying a coop is a bit more complicated than purchasing a home. It is important that you hire an attorney who is well versed in this type of transaction
- Not all lenders will be able to help you with the mortgage process and it’s crucial to partner with a lender that understands the coop mortgage process and is experienced in this type of transaction.
- Some lenders may have a minimum coop purchase price which can make this a more challenging process if a mortgage is needed.
- During the mortgage process your lender will be working on two approvals. While you are being approved for a mortgage, the building is also being approved. Both are independent of each other and either one may be declined by the lender.
- After you have been approved for a mortgage and the coop building has been approved you will know need an approval from the coop board. Because you are purchasing shares in a corporation it is important that each shareholder is financially healthy. Each coop board will have its own set of financial qualifications and requirements.
- To be approved by a coop board all potential shareholders will need to submit a coop application. Some boards only meet once a month and there may deadline to submit an application before their next meeting.
- A coop board application will always require a copy of your mortgage commitment. Another reason why it is important to work with a loan officer and lender that is experienced with a coop purchase.
- There is no set minimum mortgage amount for a coop purchase, but it may be difficult to find a lender for a coop purchase under $50,000.
- You can expect to have a slightly higher interest rate for a coop mortgage when compared to a single family or condominium. The mortgage rate could be up to .25% higher.
- Property taxes are paid by the coop association for the entire building and property taxes associated with the shareholder’s unit are included in the monthly HOA fee.
- The coop association will typically have a mortgage on the building. As a shareholder you may be able to deduct your proportionate share of mortgage interest as it relates to your shares in cooperation.
- You should receive a year end statement from the HOA which should be shared with your accountant for tax return purposes.
If you would like to know more about a coop pre-approval or start a coop mortgage application please contact Dean Scaduto, Guaranteed Rate Affinity, NMLS # 275952 at 201-560-8304 or by email Dean.Scaduto@grarate.com
Dean was a major contributor for “Buying a coop”
