Mortgage for Coop with 90% financing
Hi, We are looking to obtain a mortgage for a new home purchase in Park Slope (90% financing), but are running into a few hurdles: 1) a lot of places say they will not finance coops, 2) the loan amount is considered “jumbo” despite the stimulus package that has increased the jumbo loan size, or…
Hi,
We are looking to obtain a mortgage for a new home purchase in Park Slope (90% financing), but are running into a few hurdles: 1) a lot of places say they will not finance coops, 2) the loan amount is considered “jumbo” despite the stimulus package that has increased the jumbo loan size, or 3) they will not allow 90% financing. Has anyone on the forum closed within the past month or so, and can you recommend a lender with competitive rates? I’d prefer to avoid mortgage brokers if possible.
This is slightly off topic, but what are the repurcussions if your shares fall below the value of your mortgage (assuming 1. you plan on staying in your place for 10 years or more, and 2. you believe the market will rebound in that time)? If you believe the NY market will stay strong or will get weaker but rebound before you decide to sell, I would think this shouldn’t be a big deal? Also, I’m not sure how the appraisal factors in – if it’s too low I understand that the bank will not lend the money, but what if it’s just a little more than the price you are purchasing for? Is that a bad sign?
I bought my coop apartment last year and paid only 10% down. I didn’t want to do it, but the apartment that I had lived in for 8 years was due to become unstabilized with my 01/01/2009 lease renewal and I was afraid that the rent would be raised to market value and I would have to move (way out of my neighborhood) anyway.
Even though I didn’t have a lot of cash, my coop board accepted me based on my credit rating and solid, steady job history. When I was the cash-poor buyer, I thought that having a strict coop board was a negative because I thought it eliminated potential buyers when you want to sell. But I have since changed my mind. Now that I’m in the coop, I think it’s wise to want your fellow shareholders to be as financially responsible and have a healthy debt ratio.
The bank appraised my coop at 7% higher than my purchase price. So I guess this means that if the market drops more than 17%, my mortgage will be higher than the value of my shares. But I don’t think this makes me a liability to my fellow shareholders. I’m a considerate neighbor who always pays my maintenance (and all other bills) on time and I have a healthy savings account, so I don’t understand why they would be concerned about me just because I paid 10% down.
I don’t regret my decision to buy with 10 % down. But my advice would be to stay put in this market until you can afford the 20%. My old apartment was also tiny and I felt cramped. But if you can just deal with the space problem a little longer, I would wait. Definitely wait.
the reason coops weather downturns better than condos is b/c of the equity of the owners, limiting the worst case scenarios in bad markets. w/ significant equity, no one is underwater unless things get really bad.
“I would be scared to buy in a co-op that accepted 90% financing.”
May I ask why?? Makes no sense to me…..
Yes, Elise Levi at Manhattan Mortgage. I absolutely love her.
2:37: Thanks for the feedback. Like I mentioned, this is all new to me so this is really helpful, I will check the documents to verify where the surplus is going etc. The building is 100% owner-occupied. (And re: trusting lawyers, I agree about taking a careful approach, but I don’t really have a lot of options on who to trust as I am not friends with a lot of coop owners.)
Coops do not post profits. They may have operating surpluses — but actually a coop’s operating income should be very close to equalling its expenses. If income exceeds, is it being acquired for short- or long-term capital expenditures (and if not, why not?)? If so, what and how much? If only 90%, does a sponsor own units? If so, makes it harder to get financing as lenders want 100% owner-occupied. A lot of questions here (and not to be too cynical, we have had a lot of new owners trust their lawyers who told them squat!).
These are diffcult times, as we all know. Banks and coop boards are going to be extra conservative when it comes to approving loans and board applications. Even with very good credit, its difficlut getting a conventional loan, with 20% down. 10% makes it even more unlikely.
If you have the option, wait until you have enough of a down payment. Its a good market to buy in now, but its likely to get even better in the next 6 – 12 months.
1:16 – The negative experience I had was with Manhattan Mortgage, but I’m sure it varies person to person. Could you recommend your broker there?
1:21 – That’s a good point about financing, but I’m relying on my lawyer a bit, who said the building’s finances and reserves seem strong (this is all relative and since I’m new to this I assume she is correct). The building did post profits year over year and increased reserves, so at a minimum that appears like a good thing. I also searched through all housing records back to ’04 and only one unit had been sold in the building, but it appears the the building has appreciated significantly in value since then.