Co-op & Condo Interview
Co-op and Condo Apartment Interviews: when it comes to purchasing a Co-op or a condo, this process will be serious and time consuming. To make it easier on others, I'm detailing my own Co-op interview process in mid-2000's. It was a daunting task I was not looking forward to, and one that has not changed in decades. But knowing what I went through, I'm now better prepared to do it again. Not only are all your financials are checked, but Co-op/condo board members can and will ask you personal questions, clearly invading privacy.
What is a Co-op? A co-op is a Co-operative of owners of apartments in a building, where unit owners do not own their specific unit - they own shares of the corporation equivalent to square foot space of their unit. Co-ops are popular on east and west coasts, where land is limited and tall buildings are built in desirable locations. Co-ops are similar to condos, but in a condo situation, you usually do not need to go through a strict interview process, you only need to get approved for a mortgage before you buy.
Co-op board Income Ratio. Usually you will see requirements for income to debt. It will be stated in a ratio. My Co-op board had a 4:1 ratio, which is stricter than 3:1. Let me explain. When you purchase a Co-op, you will have certain expenses that board wants to make sure you can cover. You will have a maintenance that will be assessed monthly. See how I broke this out.
Co-op board down payment minimum. The board will also ask for a minimum down payment. To calculate it, use Calculate % of a Number Calculator. In my Co-op, it is 25%. Which means if you want to buy a $200,000 apartment, you need to pay down $50,000 minimum, no exceptions.
The Co-op pet rules. Yes, Co-ops have pet rules for your dogs and cats. Most often, there are no pet allowed, as in my Co-op. Sometimes, cats may be allowed. Less often dogs, but limited to certain height and size. For example, no more than 24" inches and 25lb. They are very strict with these rules! I heard the board interview asks you to bring your dog with you for evaluation.
This example uses the lowest salary that one person/couple could have when applying for a permission to buy in a Co-op!
Debt to Income Ratio Apartment Purchase Example:
- The Basics:
- Income: $115,200
- Purchase price: $200,000
- Mortgage: $150,000 [25% down applied]
- Monthly Mortgage: $700
- Monthly Co-op/Condo Maintenance: $1,200 [this will include your actual monthly Co-op or condo maintenance cost, including all utilities, plus income taxes plus Co-op mortgage interest].
- Other Debts: $500 [car loan, etc]
- Your total debts cannot be higher than 1/4th or 25% of your gross income! Calculate Percent of Total and plug in the monthly income in top box and your total expenses in second to see if you make the 4:1 ratio.
- Monthly Income [gross]: $9,600
- Total expenses: $2,400
- Ratio achieved! - but at what cost? - you need to have a very high salary to qualify and pay 25% down on your apartment.
- Your total debts cannot be higher than 1/3rd or 33% of your gross income. This is an easier number to achieve. Here, you only need to make $86,400/year to qualify.
The Co-op interview. Board will meet about once a month. Board will require a number of financial papers. Be prepared to give your 2 years of Taxes, 2 months of band statements, 2 months of pay stubs, last 2 W2's, and references! Oh, and a check for pay for the process [I paid $250]. Yes, references are very important to the Co-op board. My board asked for 3 references, and they cannot all be from immediate family members. You come in on night of interviews. I had one other couple with me. When I was called in, there were 3 Co-op board members. To sit in front of these 3 board members and impress them with my qualifications was hard to stomach. Questions were coming at me with incredible speed. First, I barely met the financial qualifications, so there were a lot of questions of how I would support myself. I basically spoke about home cooking, simple life, and so on. Also, there was a lot of concern about noise, and one board member inquired about wearing slippers when I walk. So I would suggest talking about carpets and how much you love rugs on top of the carpet. Also be prepared to answer questions about your personal life like family, kids, etc. Don't lie, but do not say my 17 year old is a very quiet boy who loves horticulture and tree care for palms, they'll know better. Talk about your kids achievements and quiet activities like reading/poetry, not rock band practice.
I was accepted by the Co-op board. Final thoughts - even though I was accepted, I think the process could be relaxed. Our building is 90% empty nesters and seniors, so if you are young and try to get into a 4:1 ratio building, be prepared to live in a very quiet place, where nothing happens after 8pm. Also, as no pets are allowed, it is very quiet, too quiet sometimes.
Your feedback. If you too went through a similar process, with good or back outcome, drop me a note and I will post your experience here [use contact us on site].