As a first time home buyer, buying a co-op apartment in New York City can be overwhelming, since there are so many different requirements, including the financial requirements, that you have to take into a consideration.
If you want to know what is a co-op, how to buy a co-op, what are the pros and cons of a co-op and how a co-op board approval process and interview work here in NYC, check out the video below.
• What is a Coop apartme...
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Buyer Closing Costs in NYC
• Buyer Closing Costs in...
Timestamps
0:00 - Intro
0:26 - Financing Requirement
1:18 - Post Closing Liquidity
4:10 - Debt-to-Income Ratio (DTI)
7:43 - Best Course of Action
9:24 - Buying a Co-op With a Help
10:28 - Co-purchase
11:12 - Gifts
12:43 - Guarantors
13:46 - Parents Buying
14:48 - Pied-a-Terre
You might be thinking, is it worth buying a co-op in NYC? In this video we are going to talk about the important requirements when it comes to buying in a co-op building. This will help you to understand what exactly co-ops are looking for, so you can be prepared and avoid wasting your time in buildings that don’t meet your needs.
Let’s start from 3 main financial requirements.
Number 1 is financing requirement. Every co-op has a maximum percentage that the buyers are allowed to finance in the building. The most common minimum down payment I see is 20 - 30%. There are a few co-ops that might allow 10% down payment, and I have seen co-ops that require as high as 50-60% down payment.
Assuming that you know what price point apartment you’re looking to buy and how much down payment you are planning to put, knowing how much that specific building requires buyers to put down is one of the first things that you need to find out.
The second requirements is what’s called a post-closing liquidity, which means how much liquid assets you have after you complete the purchase. After paying the down payment and the closing costs, how many month’s worth of maintenance and mortgage payment you have available. Every building is different, but the general rule of thumb is most co-ops are looking for 2-year post closing liquidity.
The third most important requirement is your DTI. Which is your debt-to-income ratio. How much money you make per month in relation to your monthly debts, usually in percentage.
25% DTI means that 25% of the individual’s monthly gross income is used to pay off the monthly debt payments. So generally speaking the lower the number the better.
The question is how to calculate your DTI.
If you don’t satisfy any of those requirements on your own, but you still wish to buy an apartment instead of renting, there are ways to purchase a co-op with some help. The ways someone can help you are either in a form of co-purchasing, gifting or being a guarantor.
Before we take a look at those, one important note here. Co-ops don’t just automatically agree for someone to help you with the purchase. Every building has different rules when it comes to co-purchasing, guarantors and gifting. Any or all of those can be allowed or not allowed.
So if you are planning to use a help of someone, either your parents, family member or a relative, don’t just assume that you can do so in every co-op. You need to look at apartments in the buildings where co-purchasers, guarantors and/or gifting is allowed. Depends on your specific situation.
And the last one is not a financial requirement but is still considered a requirement that you have to satisfy in order to be approved in the building.
This is what’s called a Pied-a-Terre, which again can be allowed or not allowed.
Pied-a-Terre is just a fancy way of saying that the apartment is being used for an occasional stay. This is a French word, that translates as “foot on the ground”. If you say I am looking to buy pied-a-terre apartment, means that the apartment is not your primary residence. Some people that are visiting NYC a few times a year on a regular basis prefer to buy a place to stay instead of staying in a hotel. If this is the case make sure that you are looking in the buildings where Pied-a-Terre is allowed. If it’s not allowed you have to claim that apartment as your primary residence, otherwise your application won’t be approved if you are trying to buy an apartment for an occasional stay in a building where pied-a-terre is not allowed.
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