Since I work with a lot of first-time buyers, a good portion of my clients are interested in buying a co-op. Here is a little information before you start on a search for a co-operative apartment in Westchester.
WHAT IS A CO-OP?
A Co-op is a corporation made up of all the occupants of the building. You don't actually buy the unit, you buy shares of stock in a corporation--so you need to make sure your lender knows that you a looking for a Co-op. At closing, you will receive a stock certificate and a proprietary lease which entitles you to occupy the unit.
Since you do not own the unit they do not pay property taxes like you would in a condo or house. You pay a monthly maintenance fee which includes your pro-rata share of the buildings property taxes, and care for the grounds, etc. You can deduct a portion of your maintenance on your taxes, but not all of it.
There is always a minimum down payment requirement which can range from 10%-50% down, depending on the Coop. In Westchester County, it ranges from 10-20%.
HOW TO MAKE AN OFFER
Once you find the apartment of your choice, your real estate agent will submit the offer. You will need your Lender Pre-Approval Letter and Proof of Funds. This includes: 2 most recent pay stubs, 2 years of W2's, most recent checking and savings account statement, most recent 401K/IRA and investment account statements. If you are using any money from a family member for the down payment, you will also need a gift letter that states it is not a loan, and repayment is not required.
It is best to have this ready when you go out looking at properties. You will have to submit it with your offer. A nice, renovated co-op, that is priced right, will go in one day! You don't want to miss out because you needed time to gather, copy and scan paperwork. This is also info you will need for your Co-op Application Package.
The Co-op board will require a pretty extensive application package that includes your financials and reference letters from employers and personal friends.
WHAT IS THE CO-OP BOARD LOOKING FOR?
1) Amount of down payment, where it came from, and how much you have in reserve after making it. Most Coops want to see about six months of maintenance in reserves after paying closing costs as well.
2) Credit scores, do you have any judgments against you, how much debt you have. They look at your monthly obligations (bills). Most require of debt to income ratio of 30% or less.
3) Current Income is important as well, they want to see that you make enough and aren't spending everything you have to pay your bills.
If your application package is reviewed and meets with their approval, the next step is an interview with the co-op board.
Everyone who will live in the apartment must attend the board interview, including children and pets. They might ask questions regarding your motivation for buying in the building, questions about your finances, or just general questions to get to know you further.
My advice is pretty simple: show up on time, dress nicely, and don't over answer their questions. You will usually hear within 48 hours if you have been board approved. The approval needs to be in writing and sent to the attorneys on both sides to make it official.
Once approved you can finalize everything with the bank and setup a closing.
Buying a Co-op is a great way to get started on your homeownership journey or downsize to a smaller living situation after selling a home. Being prepared is the most effective way to get the Co-op that is perfect for you!
