Co-ops

Co-ops of Fort Lee

Thinking of buying a co-op and not sure where to start?

Co-op ownership is different than condo ownership, in that with a co-op, you purchase shares of stock in a corporation. The co-op usually, in most cases (but not all), has an underlying mortgage. The underlying mortgage is the amount of money that is currently owed on the property from when it was originally converted. Co-op maintenance charges are usually inclusive of property taxes, the underlying mortgage, common areas and some utilities. The benefit to co-op ownership is that the maintenance is usually approximately 50% tax deductible. Also, co-ops in this area tend to have lower purchase prices than comparable condos. This makes them very desirable, however, not every purchaser is qualified to purchase a co-op. In order to keep the prices attainable, most buildings have qualifying ratios that buyers must meet in order to be eligible for purchase.

Apartment 3A is on the market at Horizon House. It is listed for $250,000 and the maintenance is $1000/mo. Traditionally, on any home or condo purchase for $250,000 a buyer is eligible (based on their credit) to put no money down and finance $250,000. Horizon House requires a 25% down payment on all purchases. So for a $250,000 purchase price, the buyer must put down $62,500 or more to be eligible. With $62,500 down, a mortgage of $187,500 will be necessary to complete the purchase. A mortgage of $187,500 will cost approximately $1171/mo (30 year fixed at 6.25%). The co-op board requires that the purchasers income is 4 times the monthly cost in order to be eligible. If the maintenance is $1000 and the mortgage is $1171, the total monthly payment is $2171. If you multiply that by 4, you get $8684, which is the MINIMUM required monthly GROSS salary to purchase the unit. If you have other expenses, such as student loans, car payments, other mortgages, etc., you must add that to the $2171 figure and THEN multiply by 4. If you choose to pay cash for the condo and NOT take out a mortgage, then the 4:1 income ratio will only be based on the maintenance figure of $1000. In a cash purchase case, the minimum monthly GROSS income must be at least $4000 to qualify.

Not all co-ops are created equal...

Here are the qualifications required of each building

Linwood Park- 20% minimum down payment and 3:1 ratio

Half Moon House-10% minimum down payment and 3:1 ratio

Mediterranean Towers West-30% minimum down payment and 4:1 income ratio

Mediterranean Towers North-25% minimum down payment and 4:1 income ratio

Mediterranean Towers South-33% minimum down payment and 5:1 income ratio

The Plaza- 50% minimum down payment and 5:1 income ratio

The Colony-25% minimum down payment and 4:1 income ratio

The Pembroke-25% minimum down payment and 4:1 income ratio

Plateau Gardens-20% minimum down payment and 3:1 income ratio

Horizon House- 25% minimum down payment and 4:1 income ratio

Not all applications are considered equal...

Every co-op application is different. Some are due on a certain date of the month in order to be eligible for board approval. Some buildings accept applications on a rolling basis and review them as they come in. All co-op boards charge a one time, non refundable application fee. This can range anywhere from $250-500.

If you do not meet the 4:1 income ratio, some boards will take assets into consideration. For example, if you are retired and no longer have a high enough income to qualify but have assets in the form of stock, cash, bonds, etc., these may be taken into consideration, but cannot guarantee board approval.

Generally, if your financials meet or almost meet the requirements, the board will request that you come in for an interview. The interview can last 5 minutes or it can last an hour, depending upon who is interviewing you. They may ask you about work, community involvement and your plans for living in the building. They may review your financial situation as stated on your application and ask you to clarify anything that isn't clear. They may simply say "Welcome to the Building".

Horizon House