How much co op can i afford

Both have their advantages and disadvantages depending on the circumstances. In certain urban areas -- especially the New York City market -- there's a third alternative to single-family homes known as a housing cooperative or co-op. Housing cooperatives combine some of the benefits and drawbacks of both owning and renting.

In this article, we'll take a closer look at what a housing co-op is, the pros and cons of this type of arrangement, and whether it could be the best fit for you. A housing cooperative is a type of real estate that is collectively owned by all its residents.

Instead of buying an individual condominium unit, to buy a co-op unit, one must buy shares in the entire building. In simple terms, you aren't actually buying real estate. You're buying the exclusive right to occupy a particular housing unit that is owned by all the residents of a building. In a co-op, the building is owned by a nonprofit corporation.

Each resident buys shares in the corporation, in an amount proportional to the size and relative value of the unit they are living in.

For example, a co-op resident with a 1, square-foot unit could expect to buy about twice as many shares as someone with a square-foot unit. Someone with a high-floor unit and a beautiful view can expect to buy more than a resident on a lower floor without an attractive view.

As mentioned, a housing co-op consists of a collection of housing units owned by a non-profit corporation. The co-op's residents are the shareholders. In exchange for buying shares, residents get the exclusive rights to use one of the housing units as well as the common areas of the property. Like a condominium, co-op residents typically have to pay recurring dues to the co-op association.

These cover common area maintenance, shared amenities, and other operating costs of the property. Residents of the co-op community are still responsible for obtaining insurance coverage for their personal property.

Insurance for the building itself is typically covered in the association fees. The biggest difference between condos and co-ops from an owner's perspective is that a condo is a form of real estate you can buy -- a co-op isn't. Another big difference is how particular the associations of condos and co-ops can be. Condo associations are typically not allowed to discriminate against potential owners.

However, co-op boards can, especially when it comes to buyers' financial condition. For example, a co-op might require a background check, financial statements, and more. Many have formal vetting processes for prospective residents. Finally, remember that all of the units are owned by the co-op corporation. So, permanent modifications to the interior of each unit are generally not allowed. This can also be a good thing.

The co-op corporation is typically responsible for maintaining appliances and other fixtures. With that in mind, here's a rundown of what homebuyers need to know about the co-op real estate structure and its benefits and drawbacks before deciding whether it might be worth considering.

A co-op, which is short for a housing cooperative or cooperative housing , is a type of real estate that is significantly different from owning a condo or renting an apartment. In a co-op, residents don't actually own their housing units or any real property for that matter. Instead, the building is owned by a nonprofit cooperative corporation and each resident is technically buying shares in it.

In exchange for buying shares, the buyer receives a proprietary least that allows them to use a specific housing unit, and the number of shares they're required to buy is proportional to the size of their unit -- so a co-op buyer who wants to live in a 1,square-foot unit can expect to buy roughly twice the number of shares as someone who plans to live in a square-foot unit.

In a way, co-op real estate isn't really a form of real estate at all. Other factors can influence the number of shares and therefore the upfront cost of buying into a co-op property, such as having a view, being on a higher floor, and the amenities and layout of the particular housing unit. A co-op unit on a high floor with a nice view of the city can be expected to require a substantially larger share purchase than a ground-floor unit, even if it's the exact same size, for example.

Many co-ops allow residents to sell their shares to another buyer whenever they want at the current market price known as a market-rate co-op , but others are more restrictive. Limited-equity co-ops limit how much profit a shareholder can earn when selling their interest in the co-op, while group-equity or zero-equity co-ops don't allow for equity accumulation at all, meaning that shareholders can't sell for more than their purchase price.

This last arrangement is more like paying rent than owning a property, although the rent for each housing unit is typically well below market rates. Although most people think of co-ops as mid- and high-rise properties in dense and urban areas like New York City, they don't have to be.

Co-ops can also be single-family homes, townhomes , senior housing properties, and pretty much any other style of housing you can think of. The biggest difference between a condo and co-op is the ownership structure of the property. In a condominium, the housing units themselves are privately owned with the common areas owned by the association. With a co-op, residents are shareholders in a company and have the right to use one of the building's housing units and the common areas of the property.

Condos are a form of real property -- co-ops are not. When you buy a condo, you obtain a mortgage in the same way you would if you were buying a house. On the other hand, since you're not actually buying any physical property when buying into a co-op, it works a little differently. Co-op buyers take out "share loans," which work the same way as a mortgage in practice but are technically a different type of loan product.

Like with a condo, co-op shareholders are responsible for paying a portion of the building's maintenance costs, property or real estate taxes , and other property operating expenses on a monthly or quarterly basis. Oddly enough, this means that contributing more to certain retirement plans may reduce your AGI and ultimately reduce the maximum loan size you can qualify for.

Monthly property taxes are customarily listed on condo and single or multifamily property listings online. Monthly other fixed liabilities consists of other recurring monthly payments that show up on your credit report such as minimum required payments for student loans, credit card debt and auto loans.

Your debt-to-income ratio is the percentage of your monthly gross income which goes towards housing expenses and other fixed liabilities. Housing expenses for a condo consist of your mortgage payment as well as property taxes and common charges. Housing expenses for a co-op consist of your mortgage payment as well as the monthly co-op maintenance payment. Other fixed monthly liabilities includes recurring payments for student loans, credit card debt and auto loans.

Post-closing liquidity is the amount of liquid assets a buyer is required to have after closing on a property and factoring in the down payment and buyer closing costs. Both condos and co-ops have an operating budget which is paid for collectively by all the owners through a monthly fee charged to each unit owner. This maintenance fee will usually be split proportionally and fairly among the condo owners and coop shareholders, typically dependent on the amount of square footage their apartment has and other factors such as floor and outdoor space.

Condo common charges are different from co-op maintenance charges in that property taxes are not included. Did you know you can save thousands on your NYC co-op with a commission rebate? The debt-to-income ratio measures your ability to pay your bills after you pay or service your new and existing debt including your new mortgage and maintenance. This includes the costs of servicing all other debt new and old mortgages, student loans, credit card debt, and any other debt payments.

Note that income can include other income besides salary, such as income from investments. Bonuses are generally not considered part of monthly income since they are not guaranteed. It is worth asking the question as some boards are more flexible than others. When being evaluating as a candidate, many times your employment track record is also very important, and boards will want to see visibility in your earnings history. If you own your own business, you will likely need to show at least a couple years of business financials and probably more of profit meeting this monthly criteria.

Guidelines can vary from building to building but these are good criteria to base your initial search on.