when you purchase a co-op, it is NOT how much you can afford, instead,

About Co-op

Co-operative apartment, or co-op, is a form of ownership in which a corporation is established to hold title to property and to lease the property to shareholders in the corporation.

When you buy a co-op, you become a shareholder in a corporation. Unlike a condominium or a house, you do not own real property. Instead, you own shares of stock and a proprietary lease allocated to your apartment. You have a landlord-tenant relationship with the co-op.

Shareholders can receive a tax deduction for co-op mortgage you may have on your apartment, in additional to a tax deduction based upon the percentage of you monthly maintenance charges which are used to pay off any underlying mortgage - this is a mortgage that the corporation has taken out on the entire co-op building.

Like any corporation, co-ops are run by a "Board of Directors" elected by the shareholders, along with the assistance of a management company. Shareholders may be subject to special restrictions imposed by the co-op Board of Directors. These rules and regulations, however, must not violate any existing rights under state or federal law.

You would probably not be able to tell the ownership from the outward appearance of a building or house. Co-op could be single family house, garden apartment, midrise building or highrise building.

Most Bergen County co-op board requires the buyer to pay minimum 20% - 51% of the total purchase price as the down payment. This is non-negotiable condition and subject to each individual co-op board.

For most co-ops in Bergen County:

Owner occupancy only
No co-signer allows
Can't Sublet
No pets (cats, dogs)

But for few co-ops, you may:
have immediate family member co-signs for you
after 2-3 years, you may rent out your unit with restrictions
of course, few co-ops are still pets friendly!

Requirements for purchasing a co-op:

Non-refundable application fee
COMPLETE federal and state income tax returns, with W-2 and/or 1099 for last 2-3 years
Copies of last 2-3 months pay stubs or equivalent
Bank statements for the last 2-3 months for ALL accounts
Letter from employer certifying employment
Fully executed contract of sale
Mortgage commitment letter (if financing)
Reference Letters
......

For ALL co-ops, maintenance fee includes:

real state taxes;
underlying mortgage - this is a mortgage that the corporation has taken out on the entire co-op building.

Sample of maintenance fee

( underlying mortgage and real estate taxes are tax deductible )

In another words, when you purchase a co-op, it is NOT how much you can afford, instead,
it is how much you can qualify for - according to your income.

The co-ops use RATIO, such as 4:1, 3:1, to calculate.

You may make good salary, say $150,00/yr, but you have a nice house with mortgage
$1500/month which you don't want to sell, you lease a BMW with $600/month, you have
some credit card debts, say $400/month. So if you want to buy an one bedroom co-op
with Hudson River view to enjoy, around $160,000, with maintenance fee about
$1000/month including real estate taxes, all utilities, parking. You think you can afford it,
but you can't qualify. Because your debts $1500+$600+$400+$1000 = $3500/month is
more than 4:1 ratio ($150,000/4x12 = $3125/month) -- Even you pay $160,000 purchase
price with all cash.

On the other hand, if you make $80,000, with NO debts at all, you should be fine for this
$160,000 co-op, because your 4:1 ratio $80,000/4x12=$1667/mon giving you room for
maintenance fee $1000 and mortgage.

The information contained herein is for illustrative purposes only.

4:1 Ratio: Income to Expenses is 4:1
All your monthly expenses can not be more than 25% of your monthly income.

Suppose your income is $50,000/year.
Each month you will have $50,000/12 = $4166/month
4:1 ratio $4166/4 = $1042/month

So if your income is $50,000/yr, and the co-op apartment you want to purchase has 4:1ratio

                              Your monthly maintenance charge
                         +    your other monthly debts (such as car loan, student loan...)
                         +    your monthly mortgage loan
                          __________________________
                              must be less than $1042

If all your monthly expenses is more than $1042, financially, you are not qualified for this co-op apartment.

Or calculate in this way:
Your yearly income >= 12x4x(the monthly maintenance charge
                                                          + your other monthly debts
                                                          + your monthly loan)

3:1 Ratio: Income to Expenses is 3:1
All your monthly expenses can not be more than 33% of your monthly income.

Suppose your income is $50,000/year.
Each month you will have $50000/12 = $4166/month
3:1 ratio $4166/3 = $1389/month

So if your income is $50,000/yr, and the co-op apartment you want to purchase has 3:1 ratio,

                                the monthly maintenance charge
                         +    your other monthly debts (such as car loan, student loan...)
                         +    your monthly mortgage loan
                          __________________________
                              must be less than $1389

If all your monthly expenses is more than $1389, financially, you are not qualified for this co-op apartment.

Or calculate in this way:
Your yearly income >= 12x3x(the monthly maintenance charge
+ your other monthly debts
+ your monthly loan)

For your convenience:

Yearly Income

Monthly Income

Ratio

4:1 Ratio

3:1 Ratio

$20,000

$1,667

$417

$556

$25,000

$2,083

$521

$694

$30,000

$2,500

$625

$833

$35,000

$2,917

$729

$972

$40,000

$3,333

$833

$1,111

$45,000

$3,750

$938

$1,250

$50,000

$4,167

$1,042

$1,389

$55,000

$4,583

$1,146

$1,528

$60,000

$5,000

$1,250

$1,667

$65,000

$5,417

$1,354

$1,806

$70,000

$5,833

$1,458

$1,944

$75,000

$6,250

$1,563

$2,083

$80,000

$6,667

$1,667

$2,222

$85,000

$7,083

$1,771

$2,361

$90,000

$7,500

$1,875

$2,500

$95,000

$7,917

$1,979

$2,639

Yearly Income

Monthly Income

Ratio

4:1 Ratio

3:1 Ratio

$100,000

$8,333

$2,083

$2,778

$110,000

$9,167

$2,292

$3,056

$120,000

$10,000

$2,500

$3,333

$130,000

$10,833

$2,708

$3,611

$140,000

$11,667

$2,917

$3,889

$150,000

$12,500

$3,125

$4,167

$160,000

$13,333

$3,333

$4,444

$170,000

$14,167

$3,542

$4,722

$180,000

$15,000

$3,750

$5,000

$190,000

$15,833

$3,958

$5,278

$200,000

$16,667

$4,167

$5,556

$250,000

$20,833

$5,208

$6,944

$300,000

$25,000

$6,250

$8,333

$350,000

$29,167

$7,292

$9,722

$400,000

$33,333

$8,333

$11,111

$450,000

$37,500

$9,375

$12,500

$500,000

$41,667

$10,417

$13,889

Yearly Income

Monthly Income

Ratio

4:1 Ratio

3:1 Ratio

So, what is your "ratio"?

Use above chart, find your income level, match to the 4:1 or 3:1 ratio - use that amount of money,
Then minus

      -   if any mortgage for your current home monthly,
      -   if any car loan monthly
      -   if any credit card debts monthly
      -   if any student loan monthly
      -   if any child support monthly
      -   if any alimony monthly
         .....
    whatever the left $$$$ is ALL (maintenance fee + mortgage) you can spend on the co-op
    you want to buy.

    If the left $amount is red, forget about co-ops, try condos.

if your income is $80,000, use $1667 - your debts = $$$$ for 4:1 co-ops
if your income is $80,000, use $2222 - your debts = $$$$ for 3:1 co-ops

The information contained herein is for illustrative purposes only.
Each Co-op board has different rules and regulations regarding qualification.