Mortgage Rules for NYC Co-ops

Mortgage Rules for NYC Co-ops

If you are planning to move to New York City, then there is a possibility that you would be getting a co-op rather than a condominium or a house. Why is it like this? Studies show that 43% of non-rental housing in the city is made of co-ops. Purchasing a co-op is not too different from buying a condo or a house. But there are slight differences, like for example you are not really purchasing the property itself rather you are buying a part of the property or a share in a corporation owned by the residents. You get more shares if the unit is expensive or attractive.


When you buy a share in a co-op, this is actually not referred to as a mortgage. What you do is you take out a personal loan and it is secured by your shares in the corporation. But most lenders will still pertain to this as a mortgage loan.

The nice thing about purchasing a co-op is that it will have lower closing costs compared to that of a regular mortgage loan. This is because you do not have to pay a lot of fees. Aside from this, you are free from paying New York State’s mortgage recording tax. Condos and home buyers need to pay this and is 2% of the purchase price.


In order to buy a co-op, you have to be approved twice. The lender and the co-op board need to qualify you for the purchase. A co-op board is like a board in a bank, they need to make sure that you have ample finances and you can meet all purchase requirements. There are times when co-op buyers are asked to put up at least 25% of the purchase price in cash. If the properties are in the posh districts like the Upper East Side, this may go up to 50%.


Keep in mind that this may be similar to buying a regular home. There are differences that you may have to be aware of. Being mindful of them will let you think clearly and will let you decide if this is something that you would want.