Dem Bums; there are pros and cons to Coops, but one positive aspect about a Coop is that you are not buying Real Property (instead you are buying shares of a Corporation), so NY State Mortgage Tax will not apply, saving you the usual 1.80% NY State Mortgage Tax for NYC properties.
In respect to what nizzy was referring to, he is talking about structuring your purchase with a sellers concession towards closing costs and prepaid expenses. This can indeed prove a valuable tool to reduce out of pocket expenses, however, on a coop the costs are VERY low compared to Real Property transactions where you will have NY Mortgage Tax, Tax escrows, etc.
In respect to post closing reserves, Underwriting guidelines only call for a couple of months mortgage payment; however, keep in mind that 401k and other retirement do count towards those reserves.
Thanks for all of the advice. Are there any guidelines for the amount of cash you should have saved up? For example, say I'm looking at a $400K co-op. I want $80K for the down payment but how much more should I expect to pay on closing costs and other fees? Is there a rule of thumb for the amount of cash we should have left in the bank after paying the down payment, closing costs, etc? Thanks.
Talk to various lenders, as their fees will differ greatly. Don't forget about PMI, which you'll usually need to pay until you've paid off 20% of the loan value. This gets added in to the mortgage payments, but isn't mortgaged out. You may be able to save closing cost fees by using the same lawyer as your mortgage broker. Also, don't forget that you can negotiate closing costs (and any necessary home improvements required as per the inspector) into the deal. ie Offer full asking price on the house but have the seller pay all closing costs. That way you benefit by not needing large amounts of cash on hand (though in the long run you pay more money due to interest on the mortgage).
And as others have said -- always have at least a 3 month cushion of liquid assets just in case something bad happens. 6 months is usually overkill but it can be a better safe than sorry situation. However, for a slickdealer, 3 month cushion can be stretched out for a year!
Last edited by bonkman; 03-27-2012 at 05:26 AM..
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