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Types Of Properties
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Coop Loans
When you buy an apartment in a co-op you are purchasing shares in a corporation, as opposed to purchasing actual real estate. The shares you purchase allow you an exclusive right to live in a given unit assigned to those shares. A co-op usually has an underlying mortgage that your co-op fee pays all or part of the payments to as well as other costs for the building. This is generally the reason why a co-op maintenance fees can be higher than that of a condo's. Your property taxes are usually paid through your maintenance fees as well, which allows for a higher deductible in the maintenance fee as well.
Because of the unique legal and financial structure of co-ops, a lender must first approve the corporation (i.e. the co-op) before it can approve you for a loan. In general a co-op mortgage will also be a tenth to a quarter of a point higher than the condo or townhouse mortgage. The banks make it this way, as a co-op is more of a risk than an actual investment. If the cooperation loses money and/or goes bankrupt, you could be paying a mortgage for an apartment that isn't worth anything. Because you are not purchasing property though, the closing costs are substantially lower than that of a condo or townhouse.
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How many shares come with the unit? |
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How does the voting work? One vote per unit? Or is the amount of votes based on the size of the apartment or the amount of shares? |
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What is the value per unit of the underlying mortgage? |
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Are there any major repairs anticipated in the near future? If there are, how will it be funded? |
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Is there a reserve fund for repairs or will you expect to be making unexpected assessment payments when a major repair comes along? |
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How much of your maintenance is deductible? Some co-ops do not have to pay taxes as NYC helped more buildings become co-ops by enacting a law that says they do not have to pay any property taxes for a certain amount of time. |
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Is the co-op facing or likely to face a lawsuit? |
Condo Loans
In a condominium, a purchaser owns the apartment plus a percentage of the common areas of the building. The purchaser takes title by deed, which is recorded in the county clerk's office. If you intend to obtain a loan to purchase the apartment, you will sign a mortgage, which will be recorded in the county clerk's office.
A condominium there is an association that you belong to once you purchase the apartment. The association provides services such as general maintenance to the common areas in exchange for a monthly fee, which is part of the monthly maintenance fee. Because it is real property you will pay your property taxes separate or via your mortgage payments, generally your lender will assist you in this area. A condo is real property therefore the closing costs are higher than those of co-ops. Just like with a co-op, when you own a condo, you will have to pay into an assessment for any major repairs or renovations.
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Make sure the condo building has a master deed deeming it a condominium project.
Ask for the Bylaws and House rules in advance to look over. You don't want to buy a condo and find out that your dog you've had since childhood isn't welcome.
How many owners live in the building and how many are renting out.
Ask to see the current budget and financial papers for the association. |
1-4 Unit Home Loans
While co-ops and condominiums are the most common form of home ownership in New York City, there are also several single-family residences and 2-4 family residences available. If you intend to obtain a loan to purchase a single-family residence or a 2-4 family residence, you will sign a mortgage. Because single-family residences and 2-4 family residences are real property, the closing costs are similar to those of a condominium.
Some of the advantages to owning a home as opposed to a condo or a co-op are that you have full rights to your house and the land it sits on. Houses generally have greater resale value; ownership rights are both legally and financially simple; you will have much more privacy than in an apartment building.
It is important to note that if you were thinking of purchasing a multi-unit home but then decided you couldn't afford it, you might not have realized that the money you will take in from rent you can claim as income. Lenders will look at this as extra income and the chances of getting that higher mortgage are greater than you thought.
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