What to expect when getting a loan for a corporative apartment
Here are the few points that will let you know exactly what you are going to be up against when you’re looking for a mortgage loan for purchasing a cooperative apartment. It is going to be extremely difficult and here is a list of what you are going to be up against:
Lack of a satisfactory security for a home loan
As already mentioned when you purchase a corporate apartment you are not given a deed to the property but simply to share certificate that entitles you to a certain amount of shares in the cooperative housing. The Cooperative Corporation still owns the entire building and as a shareholder if you are made up part of their property and given the right to occupy the apartment. Mortgage lenders want to deal property in the name of the borrower which they can use as security for the money that lend. When you purchase a cooperative apartment the apartment building is still deeded to the Corporation.
Lack of cooperation
Some cooperatives go as far as to not allow financing of individual units. They will let you purchase shares in the entire building and give you the right of possessing your apartment but that is all. Many co-op’s also expects the buyer to have the ability to pay for the entire individual unit. This is one of the criteria to maintain a certain so-called standard of the residents in the cooperative housing.
But some real estate agents and cooperative apartment owners may have a good idea about the lenders in your area who are currently making corporate accounts. You may be able to obtain the financing if your employer puts in a good word for you with the lender who handles corporate accounts. Some commercial banks also offer cooperative loans as an accommodation to an important business relationship.
However, think about the situation where your area has a very few lenders that are offering cooperative financing. First of all, limited competition will usually result in extremely high loan origination fee and interest rate. This means that you end up paying much more for a cooperative apartment than you would by purchasing a regular home for the same value. Also, if there are few mortgage lenders dealing with cooperative loans today, what if these vendors stopped dealing with these loans in the future? This means that you will have difficulty in finding potential buyers for your apartment in the future. Finding an all cash buyer is extremely difficult. Your only other option may be to carry the loan for the buyer yourself which is considered to be an extremely risky proposition.
It is keenly advised that while cooperative apartments have their charms and attraction, you should carefully consider your options before you decide to go ahead with this decision.