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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.
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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!
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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
......
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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.
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Sample of maintenance fee
( underlying mortgage and real estate taxes are tax deductible
)
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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.
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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 $50000/12 = $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 4:1 ratio,
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)
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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)
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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 |
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| 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,
minus
- if any mortgage for
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 $$$$ is ALL (maintenance
fee + mortgage) you can spend on
the co-op you want to buy.
If the left $amount
is red, forget
about co-ops, try condos.
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if
your income is $80,000, use $1667 -
your debts = $$$$ for 4:1
co-ops
if your income is $80,000, use $2222
- your debts = $$$$ for
3:1 co-ops |
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The
information contained herein is for illustrative purposes only.
Each Co-op board has different rules and regulations regarding
qualification. |
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