Interest rates for condos vs coops

I think this is a good summary. https://www.investopedia.com/terms/o/occupancyfraud.asp
Any lies on mortgage application are considered a fraud and there could be recourse.

My bankers told me property needs to be used for the stated purpose for at least one year. After one year it is easy for a homeowner to claim that mortgage application was honest, but occupancy changed due to change in circumstances (which is not illegal).

Interest rates depend on risks associated with a specific building. A coop has a claim on the unit senior to that of a bank, and many coops have a collective building mortgage. That makes coops more risky.
Some condos have a high proportion of tenant-occupied units, that makes condos more risky. Depending on characteristics of individual condos and coops, rates will vary.

Because of risks associated with collective ownership, both coop and condo interest rates are higher than those on a single family house.

Both condos and coops have annoying applications for owners and tenants to fill out and both coops and condos depending on bylaws can be more or less friendly to investors. Condos are typically friendlier to investors, but not always.

All else being reasonably equal (financed amount, quality of the unit, financial condition of the borrower, etc.), co-op loans have typically had slightly higher interest rates, because the lender is not the first lien holder in the event of default (the co-op is). Therefore the lender is taking greater risk, and is compensated for that through the higher rate they charge.

The effect to a borrower of violating a term of the loan could be that the entire outstanding amount of the loan comes due at the time the violation is identified and the borrower is notified. As to the likelihood of that, you'll have to do your own assessment and decide whether it's a worthwhile risk to take. I would suggest that the simple fact that where bank account and tax docs are sent is not the address of the mortgaged property might be a significant indicator of non-primary resident status.

Our comments crossed paths in the posting! Good article on occupancy fraud!

I have noticed that one of my wholesale lenders do not charge a higher interest rate for a co-op.
Many lenders are doing a buydown on the rate which means the first year the rate will be reduced by 2 percentage points, the second year by one percentage point.
Ellen Silverman
E.S. Funding Co.
NMLS #60631
EllenSilverman @ESFundingCompany.com