This includes the costs of servicing all other debt (new and old mortgages, student loans, credit card debt, and any other debt payments). You should target a debt-to-income ratio of less than 25% to 30% - yes, the lower the better. 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). In some situations, co-op boards make an exception for high earners, and are less stringent with financial reserve requirements. If you assume a co-op purchase price of $999,999, then you would need roughly $341,000 in the bank before the purchase ($132,000 post-close liquidity, $200,000 down payment, and roughly $8,500 in closing costs).ĭon’t give up hope if you don’t meet this requirement as exceptions are made, but this should be the framework you use when beginning to consider co-op apartments. Generally other real estate and retirements accounts are not included in this calculation.Īs an example, if your mortgage payment and maintenance are $4,000 and $1,500 per month, respectively, you should be prepared to have an additional $132,000 in cash, stocks, or bonds post close. To calculate reserves, use cash, marketable securities (stocks and bonds), and other investments that can quickly and easily be converted to cash. For most co-ops in New York City, a good rule of thumb is to expect to have two years of maintenance plus mortgage payments as financial reserves (post closing). Post-closing liquidity requirements are also commonly referred to as financial reserves. As a general rule, the higher the required down payment, all else equal, the lower the price per square foot. While this might be good for the financial quality of residents in the building, it can affect your ability to purchase and price. And we have even run into situations where co-ops ask for 40% or greater as a down payment. Some NYC co-ops allow for 20% or 25% down, while others expect 30% down. It is important to have a good feel for what you can afford ahead of time so that you are looking at the right co-op apartments and not wasting peoples’ time (yourself included).Įach co-op is different. Just because a bank will lend you money to purchase a co-op in NYC doesn’t mean you are financially strong enough to buy a specific apartment. Having said that, you will also likely need a larger amount of money in your bank account after you close in order to meet the co-op board financial requirements and be welcomed in to the co-op after the application process and board interview. If you are thinking about buying a co-op in NYC, you are probably going to get a lot more for your money than if you were buying a condo.
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