Coop Boards are unpredictable... What should I do?

One common tactic can be to pay all cash, close and then apply for a mortgage. Some notes:

1) The building can deny your application for a mortgage - but at least you'd be in the building already. Presumably this is better than being rejected by the building.

2) Some building do not allow buyers to refinance for a specified amount of time after closing. This is usually also stated in the application but it's also a good question for your attorney.

3) You might also check w/ your accountant. I'm not sure that the tax deduction on a mortgage is the same if you get one after closing.

Usually agents can be found who have at least some idea of what a specific Coop is looking for - it's probably best to try to find one of these.

How does lowering your down payment affect your income to expense ratio? Obviously this will help with the liquid asset requirement but from your OP, that doesn't sound like the issue.

mneuwirth is correct, you could try to do a refi, but find out what rules with co-op are.

interest will still be tax deductible - i'm a cpa so i know that much

Ask your broker or someone at the building about maybe including with your package a nice letter of introduction that re-calculates your situation based on an all cash purchase? In that letter you could maybe also explain/justify your reason for preferring to get a mortgage. My board application was full of letters patching for things I didn't quite qualify for. It worked out well even with competing offers around.

Menuwirth: yes! I considered that strategy... But, I am sure the refi/mortgage rate will be different that a "new purchase" mortgage rate. However, I appreciate your reinforcement of that consideration.

Jms8: no, I don't want to "lower" my down payment... I want to leave it as is... Which is 30%. However, if I increase my down payment, or pay the whole price all cash, it will drop my expenses significantly, thereby having a easily approved coop application. However, I want the mortgage... So, I can take advantage of an incredible rate; 2.40%

Gellereque: can't hurt, THANK YOU! Gonna definitely do that!!!

Would welcome any more suggestions?
Stinks that these boards are a bit unpredictable, and I literally have to hope, and guess they may or may not deny me for something which was never even a factor!!! Arghhhh

Talk to the listing broker about whether you need to lower the amount of your mortgage, but yes, that may be the way to go.

This is actually the opposite of an unpredictability issue: if the board has a hard-and-fast published ratio of income/expenses, then to admit you if you don't hit that ratio is to open themselves to charges of discrimination from everyone they've turned down who didn't hit it.

ali r.
DG Neary Realty

I just bought a coop after living in condos for the past 25 years. Although I could have paid cash for the apartment, I wanted to take the maximum mortgage permitted by the coop board since refinancing and home equities are more cumbersome to get in a coop. My broker and the seller's broker advised us as to the mortgage amount based upon the coop's rules about our particular financial situation. The mortgage they recommended was smaller than we wanted, but we passed immediately on the financial part and had a board meeting quickly.

This was all new to us because the condos we had lived in allowed you to take any mortgage you could get providing you put down no less than 10% down. We could have purchased a comparable condo to our coop taking a much larger mortgage.

superlun - perhaps the most important point was that there are agents who are familiar with the building in question. Coops are not so unpredictable - they have a track record of what they've accepted in the past. Please feel free to give me a shout about the building in question - I may have sold there in the past.

When you say you are "in a position" do pay for this apartment in cash, what exactly does that mean?

Would you still have at least 2 years' worth of living expenses in post-closing liquidity?

There is ample room between all cash and 30% financing that will allow you to meet the annual income >4x expenses, so just set your mortgage amount such that you qualify for the income test.

@superman, so your coop is asking 4x the annual expenses ? Does this mean if the monthly expenses are 6k you basically have to make a annual income of 300k ?

where are you getting 2.4% mortgage? if it's not a vanilla 15 or 30 yr, the coop board may also not like it.

NYCMatt: I am in a 'position' to purchase this unit all-cash via liquidating some assets, primarily my investment accounts, and thereby avoiding a mortgage, and yes.. I would have 2 years worth of living expenses in post-closing liquidity.

REMom: Yes, you are correct... I can adjust my mortgage amount down to exactly or slightly above to fulfill this expectation of the coop board... However, it seems silly that I should do this as it may not even be a factor in denying my application? or it shouldn't even be a consideration in my case as my assets should be more than enough to secure my expenses. Am I not allowed to be semi-retired?

MlBNYC: Yes, as far as I can tell , yes...

I suggest you go back & read front_porch's response; she's in the field & a real smart cookie. You are allowed to be whatever you want to be BUT the co-op is allowed to place any criteria they think fit for investment in their corporation. You either qualify or you do not.

ab_11218: I am getting a 2.726% APR rate via a 5/1 ARM via HSBC as a premier account holder.

Blah Blah Blah... before I start hearing from the masses about the disadvantages of ARMs, I am quite aware of the risks behind ARMs... But, IMO, they are good products for those individuals who don't foresee themselves having the mortgage for more than 5 years. Which is my case. In essence, I am taking the mortgage out to invest... While securing this mortgage with the assets I already have. Don't get me wrong... If I were unable to secure this mortgage with assets, I would surely go the route of a FIXED 15/30year mortgage.

this will definitely be a red flag for the coop board. they are looking for "long term shareholders" and you're telling them that you'll be out in under 5 years. there are numerous boards that will not allow ARMs, maybe a 10 yr, but definitely not 5.

I read his post to mean that he intends to be out of the mortgage in 5 years, not the property.

Sounds like s/he is using ARM and mortgage deduction to get free money to invest in higher yielding vehicles.

And I would hope board would see big picture and green light the purchase, but Ali's point is welk taken.

"Blah Blah Blah... before I start hearing from the masses about the disadvantages of ARMs, I am quite aware of the risks behind ARMs... But, IMO, they are good products for those individuals who don't foresee themselves having the mortgage for more than 5 years. Which is my case."

Fine, you won't hear from "the masses" about the disadvantages of ARMs.

What you WILL most likely hear from the board is a big fat "NO".