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Home arrow Business & Finance arrow Financing your condo, co-op, or townhouse
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A cooperative, or co-op, is similar to a condominium arrangement. In fact, if you were to look at two high-rise buildings standing next to each other, you could not tell the condo from the co-op (unless there's a sign out front). The difference is, instead of buying a particular unit in a co-op, you are buying a share of ownership in the entire cooperative. It's like a corporation where you own shares of stock; the association owns the complex and the individual owners buy their shares. Lenders sometimes call this “share financing” because the loan you get isn't to purchase the property itself but instead your share of the cooperative. The cooperative will also have its own association (like a Board of Directors) that makes sure the cooperative's rules and regulations are enforced. Co-ops are typically found in densely populated metropolitan areas. There are numerous in New York City and Washington, D.C., but they're not too popular throughout the rest of the country.

Co-ops are similar to condos, with a couple of distinctions: Co-ops have one big mortgage for the entire complex — if there is financing on the building at all. Then, individual buyers of the cooperative shares essentially earn the right to lease from the cooperative. When you make an offer for a “share” in a cooperative, you will not only apply for a loan to purchase that share but also apply to the board of directors. The board will review your financials and poke around in other aspects of your life to make sure they want you as a neighbor. You can't be discriminated against because of race, sex, age, or other prohibited discriminatory factors. You can, however, be turned down by the board if your financials aren't up to their standards, if you've had recent credit problems, or even if your lifestyle is an issue. If the cooperative is made up mostly of retirees who want a nice, quiet life, and a notorious rock star wants to move in, the Board may not approve the purchase due to the potential of all-night parties and loud music. On the other hand, when you make an offer on a condo, you need only be concerned with getting financing.

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