Co-op vs. Condo

Can you please tell me the differences? Which is better? Can you still apply for an FHA loan or are you required to put down the whole 20%?

Re: Co-op vs. Condo

With a co-op you don’t own your actual unit the same way you would own a single-family house or even a condominium. Co-op owners own a share of the entire legal entity with a right to occupy your particular unit. Very often with a co-op you cannot rent out your unit (though this differs from co-op to co-op). Also, quite often the maintenance is higher than that of a condo and board approval can sometimes be a bit difficult or time intensive.

A condo is more like a single family home in that you own your actual unit as well as a percentage share in the common areas of the building. Sometimes the purchase price for a condo may be higher than for a co-op in the same area. Of course, these are all generalizations and would certainly vary based on the specific buildings you were looking at.

With respect to the FHA loan, they are generally not available for co-ops and are available for condos in certain situations. You should speak with a mortgage professional for more information about this, however. If you would like a referral to a professional who can answer your lending questions, please let me know.

I hope this helped a bit. If you have any other questions or I can help at all, please let me know. Good luck with your home search!

Kristen M. Breglio, Esq.
The Breglio Law Firm, PLLC
1225 Franklin Avenue, Suite 325
Garden City, New York 11530
p: 516.240.8033
f: 516.240.8032
www.thebregliolawfirm.com

Re: Co-op vs. Condo

Thank you.

Re: Co-op vs. Condo

Kristen's explanation is right on!

Just wanted to add that, even though you can't get an FHA loan for the purchase of a co-op, you don't necessarily need 20% down. From a financing standpoint, you can get a conventional mortgage with as little as 5% down, IF you qualify (generally, to put down that small of a down payment, you need stellar credit and a great debt-to-income ratio). But I have had customers put down less than 10% and get a conventional loan.

However, apart from getting a mortgage, many co-ops have their own rules about financing and require a minimum down payment. It may be 20% down, 10% down. Even for co-ops that don't mandate a certain down payment and evaluate case-by-case, I have found that individual sellers are hesitant to accept an offer if the buyer is putting less than 10% down because they are afraid that the co-op board won't approve the buyer.

With a condo, you can do an FHA loan if the condo complex is on an approved list (there are certain requirements that are pretty basic). If your loan officer handles FHA loans, then he/she can advise you on this. Even if a condo isn't currently on the list, if it qualifies, I believe it can be added fairly easily.

But co-ops tend to be more affordable because they are often priced lower than comparable condos (because as Kristen explained, condos are a better form of ownership as you own the real property and there are generally fewer restrictions), and because you pay one maintenane payment (which includes property taxes, building maintenance, and may even include some utilities such as heat and water). With a condo, you pay common charges for maintenance of common spaces and any amentities, but you pay separate property taxes that can be as much as a single family home in the area.

Feel free to contact me with more questions. I sell a lot of condos and co-op properties.