How to Compare Co-op Mortgages

Finding a lender who finances co-operative mortgages isn't easy. Most lenders are concentrated in the larger cities of the Northeast, where co-op living is common. A co-op is a system of ownership in which the residents of an apartment building own shares in the co-op-or company-that owns the building. Technically, you are buying shares in the company, rather than buying an actual piece of property.

Difficulty: Easy

Instructions

1. Start by collecting referrals for reliable lenders. Try to choose a lender that specializes in loans for co-ops, so they have the background, knowledge and experience to help you.
   

2. Often, smaller banks or savings and loan institutions can have better rates for a specialized product such as a co-op loan, than the larger banks; you may have to do some research to find them.

3. As with any other product or service, do some initial homework: Compare the offers and services of as many different lenders as you can, although co-op lenders may be few and far between, depending on what part of the country you are in.
   

4. Compare mortgage rates. Typically, the mortgage rate for a condo is a little bit higher than the rate for other types of homes. The amount you are financing, the amount of your monthly payments and your interest rate are all still things to consider.

5. One advantage of co-op loans is that your closing costs may be lower - expect to pay around $1500 in closing costs.

6. When comparing mortgage lenders, consider how easy or difficult it is to contact them with questions or problems. Do they have a local office, a Web site or a toll-free phone number? Co-op financing isn't easy or commonplace-you may need to be in touch with your lender quite a bit throughout the process.

7. Understand exactly what you are financing; some co-ops won't allow you to finance an individual unit in the building. Basically, you are assuming a pro-rata share of the existing mortgage on the entire building rather than on an individual unit.
   

Tips & Warnings

• Because it's so difficult to obtain a loan for a co-op, you will almost certainly end up paying a higher interest rate, as well as more points. However, your closing costs may be lower.
• Many co-op units are conversions, meaning that an older building has been converted into living units. Before you get financing, make sure that the foundation is solid and the plumbing, heating and electrical systems are all in good working order.
• If you are buying a co-op as an investment, you may not be allowed to rent it out. Check the rules on this if it is something you may want to do. (It may not be easy to resell your co-op, either)
• If you buy a co-op unit, you are considered a member of the co-operative company that owns the entire building. You will be able to give your opinion on such things as amenities, services and by-laws.

[mghiuzeli]

on 6/26/2009 I was told the building has a low owner/renter occupancy ratio and financing has been difficult but the association is in good financial standing. I plan to make a high down payment and I am in good financial shape. What chances do I have to be approved? What difficulties do I expect to encounter at this stage in the process?

[mghiuzeli]

on 6/26/2009 I was told the building has a low owner/renter occupancy ratio and financing has been difficult but the association is in good financial standing. I plan to make a high down payment and I am in good financial shape. What chances do I have to be approved? What difficulties do I expect to encounter at this stage in the process?

[mghiuzeli]

on 6/26/2009 I was told the building has a low owner/renter occupancy ratio and financing has been difficult but the association is in good financial standing. I plan to make a high down payment and I am in good financial shape. What chances do I have to be approved? What difficulties do I expect to encounter at this stage in the process?

[newbe]

on 7/28/2008 When was this written? $1500 in closing costs? - I was told I will pay $3,000-$4,000 in closing costs.