Question About Co-op Downpayment Requirements

Anybody? Thanks!

There is no way you are going to get around putting 25% down. You will also need to have $ in the bank equal to at least two years of mortgage / maintenance payments. Some buildings are much stricter about liquid assets after you deduct your down payment (for instance, some require double the purchase price of the apt. in savings / stocks / bonds). You can certainly take out a mortgage on the NJ property, but this dept will count in the negative column of your balance sheet when you present your financials to the board. Bottom line, you need 25% down, plus liquid assets.

If I get a mortgage on my current house, I will have 2 years worth of mortgage and maintenance payments in the bank.

Also, I am not sure I completely understand your response. Can the equity I cash out from my current house count towards the mandatory 25% down? Again, I have enough equity in my house to cover the entire price of the house.

The other thing to consider is debt-to-income ratio. Most coop boards do not want to see that you are spending more than 25% of your gross salary on housing costs, which would include the mortgage payments you would make on your NJ house, as well as the monthly fees / mortgage for the apt. I think it all depends on the balance of ALL your numbers (assets - liquid and not liquid - plus other debts like mortgages, student loans, other loans, credit card balances, etc.). There's no magic formula because each board is looking for a slightly different financial profile. I wish I could tell you whether they will be fine with the mortgage on your house since it will provide the cash you need for the apt. down pyament, but maybe the question is how having the mortgage on your balance sheet will affect your overall financial picture. If you are working with a broker, perhaps they can give you some info on what this particular board likes to see.

I was planning to rent out my NJ house. Based on my estimates, I think I can rent it out for a break even point provided interest rates don't skyrocket. Except for my current mortgage, I have no debt. No credit card balances, student loans, etc.

Right now I don't have a broker because the apt. I am interested in is owned by a holding comapny (it was foreclosed on) and it is being marketed by a Long Island brokerage firm. And being that they are all the way out on LI they don't seem to know much about Manhattan co-op boards.

The Long Island brokerage firm should be able to give you some ideas as to what the board is looking for.

If I get this straight, what you want to do is to take a first mortgage or a HELOC out of the NJ house. So what the board will be looking for is your ability to cover those loan charges, plus your property taxes, plus your maintenance on the LIC apartment, plus the LIC apartment's mortgage. They are probably looking for your income to be 3x to 4x all those charges.

Most boards, however, don't really care about assets that aren't monetized -- it's nice that you have a house in New Jersey, but the board won't treat it as a source of rental income until you can show them a signed lease and cancelled checks.

So you can either make sure your salary covers all your housing expenses now, or rent the house and show the board your salary plus the rental income.

ali r.
{downtown broker}

When I bought my co-op in Manhattan, I was selling my NJ house which had an underlying mortgage. I don't recall having to provide any documentation that I was in contract or had closed despite their being ample evidence in the board package that I had a home mortgage. Perhaps someone who has the experience of sitting on a co-op board can comment on the possibility of letting them just assume that you a "moving" and hence "selling" your NJ home. That being said, don't do anything financially imprudent!

Have sat on a coop board and in my opinion the OP's chances of approval are not the best unless the have adequate income to debt ratios of 3-4x as a previous poster mentioned.

A new mortgage will show up in the board's credit search and using rental income as part of your overal income will be closely scrutinized. Board might also give you a tough time thinking your primary residence is really NJ and you are using the coop as a part time residence.

Of course all boards are different but would say as general rule of thumb the more expensive the units are in the building the tougher the board is going to be.

If I understand this correctly you can do the ENTIRE transaction as a cash deal. You should definately think about this option more even though you are leveraging your house..the board would want to be sure that you have enough in the bank to cover maintanance for 1 -2 years and that you can cover you mortgage with your income in NJ.

thanks everyone. I currently have a small mortgage on my NJ house, but will need to take a seocnd one in order to have the cash available to purchase the apartment. I do have 20% of the asking price in the bank, which is far more than needed to cover 2 years of the maintenance and taxes.

If you took cash out to make 25% then you qualify because you now 25% to put down. The question is will your debt to income ratio be affected with the extra liability? But if you have an extra 20% of asking price in the bank, what about using 5% of that to make 25% instead of cashing out of your NJ home? Or is that 20% your down payment? sunny_hong@countrywide.com