When it comes to securing home financing in New York City, condo loans and co-op loans are two of the most prevalent choices. In a co-op building, the buyer purchases a share of the entire property and is considered a co-owner along with their fellow residents. With a condo, the buyer is only purchasing the unit they are going to live in. Both options offer their own set of pros and cons, but when it comes to finding a mortgage, co-ops can be easier to finance than condos – if you can find a lender who offers the option.
According to a story from the Wall Street Journal, some lenders may be more wary of financing a condo than they would a co-op.
The article elaborates, “If too many units in the building are sitting empty, more than 10% of units are owned by a single investor or if a high percentage of homeowners are delinquent on association fees, a lender may turn down a [condo] mortgage.”
When it comes to co-ops however, many lenders feel more secure financing these properties due to the strict financial vetting that potential buyers must undergo when they apply to the co-op board.
“Joining a co-op is akin to joining a country club, and the club members who are voting on your membership want to know that you play in the same financial arenas they do,” says Michael Shapot, a real estate broker in NYC.
Nevertheless, financing a co-op isn’t necessarily easy. Simply finding a mortgage lender who offers co-op financing can be a challenge in itself. Luckily, Luxury Mortgage offers co-op financing for homeowners in NYC as well as other locations across the country. If you’d like to learn more and request free information, don’t hesitate to contact us at (888) 379-0303.
Aside from finding a lender who will provide co-op financing, there are other hurdles many buyers must face. For instance, some co-op buildings have very strict rules about how buyers can pay for their home, limiting the amount of the purchase that can be financed. Some buildings only allow the buyer to finance up to 50% of the purchase price. Others do not allow buyers to have a mortgage at all.
All of this can make it seem like a near impossibility to finance a co-op, but not to worry. If you’re interested in purchasing into a co-op in NYC, you’ll be glad to know that many lenders have approved building lists that have the names and locations of co-ops that allow financing. When you talk to a lender, be sure to ask about any approved buildings they have worked with in the past.
If you’re leaning more towards a condo purchase in NYC, your financing options are a bit more flexible. However, don’t be surprised if you still have to jump through a few extra hoops when it comes to your application process. When it comes to condos, lenders want to make sure the overall property as well as the unit itself is not too much of a financial risk. Therefore, they will most likely examine the HOA’s financial history, look at the percentage of owner-occupied units, etc. to determine the level of risk.
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