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There is an apartment that I like and can cover the mortgage and common charges without issue, but there is a Maximum Financing of 60%, which I cannot do.
Any way around this?
Can I take out a Home Equity loan at the same time as my mortgage? Or would this be known by the co-op board and constitute "financing"? Do banks do this?
Can I borrow the money from a family member with the intention of paying it back? (would this be considered "financing"?
What about borrowing money from a family member and paying it back in 3 months by taking home equity loan?
Or should I just give up and just realize that the co-op just doesn't want people of my ilk in the building?
Typically you write a check to the lawyer and then at closing the downpayment is paid using a check from the escrow account set up by the lawyer. Ask one if you can have yourself pay what you can, your fanily write the lawyer a check for the downpayment balance, and then you should be fine. However, when they look at your financials at the review prior to interview, if it's obvious there's NO way you could swing the 40%, then you could get rejected from the outset. Find out if they allow parents buying for kids or guarantors/co-purchasing. In that case any ararngement you can figure out will be fine.
In short, you cannot take out a home equity loan on the apartment you are buying. Any loans have to be approved by the board and the board would never approve it under these circumstances. Their 40% down requirement is a filter of sorts to supposedly insure the financial wherewithal of any shareholders. An entry requirement to their club if you will.
You could borrow from family, but this money would have to at the very least be "seasoned" in a bank account of yours for many months; the reason for seasoning the money is that when you have to provide the board with your bank or financial statements going back 3-6 months, this family loan/gift shouldn't show up as a recent deposit. It will hopefully look like your money. The board could, of course, be suspicious and ask for statements going back even further, though, if it seems odd you would have all this money given your circumstances/age/job. If they have a no-parents-buying-for-kids rule, then they'll likely see through this anyway if you don't have a plausible explanation for where you got tens of thousands of dollars (or more).
The fact that they demand 40% down suggests to me that this is a serious, hard-nosed board and you probably can't fool them. With coops, it is always best to be honest up front so there are no blow ups down the road and fights about you getting your escrow money back if the deal falls apart due to your deceptions.
Also consider the following:
Any money received by you from your family member(s) will be viewed as a gift. Since you will be obtaining a mortgage, the bank will request a signed gift letter from your family member (with proof of deposit and withdrawal) for each gift amount. It will be a requirement of your loan application. The gift letter(s) will also need to be included in your Board package.
Once your family member signs that gift letter, the money given cannot be considered a loan.
By tax law, any gift beyond $12,000 per year is taxable and must be reported.
Neither the bank nor the Board are required to report you to the IRS. But, you are required to do so.
That is one reason why kylewest suggests to have the money deposited in your account several months prior.
^^ a little clarification on that taxation point
gifts beyond $12K are not taxable to the recipient.
In fact, in the world we live in -- that of a $5mm gift tax exemption -- they're probably not going to be taxable to the donor.
They must, however, be reported to the IRS.
DG Neary Realty
What ali said.
he is talking about a loan from family not gift. your can get a loan from a family member but in order not to qualify as a gift it has to have market terms for the lender, ie.interest rate close to what you can get from a bank presumably.
but JB, a loan from a family member at market rate will definitely be considered financing by the co-op. This apartment is not for the OP.
it's $13K this year.
you cannot afford this apartment with the terms that the board put forth. move on. find an apartment that you can afford. even with the 40% down they will want to see another 1 year of mortgage/maintenance in liquid assets. where will you get that on top of the other money?
if you have 10% down payment, save until you have a real down payment. if you have more, find a coop that fits your finances.
"Or should I just give up and just realize that the co-op just doesn't want people of my ilk in the building?"
Now you've got it.
On a related note, this is one of the reasons why NYC RE has't crashed as much as the rest of the country - because of coop boards' stringent financing requirements were tighter than many banks.
I don't know of anyone who was able to finance a down payment for a coop, excluding "gifts" from family members. The board wants comfort that you are financially secure.
Yes, it's aggrivating. On the other hand, if this building requires such a hefty down payment, think of the resale value - possibly lower than it could be. If you can't swing it here then consider it a blessing and move on.
Financing requriments and gifting policies are different. You should ask your broker to find out what the gifting policy is. If they allow gifting up to the extent you would need in order to put down 40%, then you actually have a shot at approval. I don't think there are any financial 'tricks' you can do with the bank unfortunately, it would have to be a real gift even if all parties lie about the repayment requirements on the gift letter.
When I purchased my first co-op in 1996, my mother lent me most of my down payment. The board didn't have a problem with that aspect, per se. However, they did ask me to put 12 months of maintenance into escrow for one year but that had more to do with my age (mid twenties) and just starting out in my career. After a year, when they saw that my mortgage was not in arrears and my maintenance checks arrived on time, the got back my money with interest (and interest was not bad in those days!)
I'm with Matt here
You can't satisfy the requirements of this co-op. You do not want to try to dupe your neighbors - who you will in fact be going into business with, so move on until you are able to better pass a co-op board.
Financing regulations are not a whim - they are realistic standards set by boards to be sure that purchasers can well afford apartments and are not stretching too thin. You are stretching
Unless you can get a family member to gift you the necessary sum (and the board will likely want to see an affidavit to this effect to be certain you're not simply borrowing the funds to pass muster) there is really no way around this hurdle.
Meanwhile, as others have pointed out, the down payment is only part of the puzzle--the board will require you have a healthy liquid asset base after the down payment. If you have to stretch for this one, it really is probably better to move on to something that falls more easily within your financial ability. The last thing you'd want is to feel stretched or 'house poor', even if you were able to somehow pass the board.
"You can't satisfy the requirements of this co-op. You do not want to try to dupe your neighbors - who you will in fact be going into business with, so move on until you are able to better pass a co-op board."
Target makes a good point.
In a co-op, you are a SHAREHOLDER.
If this were any other corporate enterprise, lying about your finances to the board of directors would be considered "fraud".
As a Coop Board member, we also consider the long term financial well being of the applicant.
If they lost their job or were transfered, do they have the liquid assets or would this generate a hardship for them? Our building does not allow a sublet until the shareholder has owned the apt for two years. A desperate seller often sells below market which is bad for the entire building.