What Are the Financial Requirements for Co-ops in NYC?

Co-ops in NYC typically require a minimum down payment of 20%, a debt-to-income (DTI) ratio no greater than 30% as well as one to two years of liquid assets post-closing.

It’s important to confirm the financial requirements individually by co-op, as each building has its own financial guidelines for applicants. Co-ops also have varying rules and fees for subletting as well as alterations (renovations).

You should also keep in mind that not all co-ops have stated financial requirements for applicants. These co-ops tend to take a more holistic approach when reviewing a buyer’s financials. For example, the co-op may be okay with a debt-to-income ratio above 30% if you have 10 years of post-closing liquidity and/or are making an all-cash purchase.

What is the Debt to Income Ratio Requirement for a Co-op in NYC?

What Is the Minimum down Payment for a Co-op in NYC?

What Is Post Closing Liquidity in NYC Coops?

How Much Co-op Can I Afford in NYC?

Most New York City coops require applicants to have a debt-to-income ratio below 30%. The strictest co-ops target 25% or less. More flexible co-ops in NYC may permit up to 35%.

A DTI above 35% is somewhat risky, even if a co-op does not openly disclose its financial guidelines for prospective buyers. Fortunately, some co-ops contextualize your debt-to-income ratio by taking into account how much you’re putting down and what your overall personal balance sheet looks like.

If your financials are borderline, it’s a good idea to have your buyer’s agent discuss them with the listing agent. Often times the listing agent or seller knows somebody on the board who may be able to take an informal (non-official) glance at your financials to see if you stand a chance of being approved.

Virtually all co-ops in NYC require a minimum of 20% down. There a number of co-ops which require 30%, 50% and sometimes up to 70% down. Fortunately, it’s much more common to see the 20% requirement as opposed to something higher.

It’s worth noting that co-op buyer closing costs are roughly half of what you’d pay for a comparable condo. Therefore, you save approximately 2% in buyer closing costs when buying a co-op which you can use to marginally offset the higher down-payment requirement for co-ops vs. condos.

While co-ops in NYC can be up to 40% cheaper than comparable condos, much of this benefit is offset by the fact that you need to have higher income and greater savings in order to qualify for a typical co-op apartment in New York City.

It’s fairly common for coops in NYC to require applicants to have between one and two years of liquid assets post-closing. This means you need to have 12 to 24 times your monthly mortgage and co-op maintenance payment in cash (or liquid equivalent) after making your down payment and factoring in buyer closing costs.

Here’s an example: Let’s say your mortgage payment is $5,000 and your co-op maintenance payment is $1,000. If a co-op has a 2 year post-close liquidity requirement, you need to have $144,000 [24 x ($5,000+$1,000)] in liquid assets once you close.

If you’re buying all cash, you’d simply need to have 12 or 24 times the co-op’s monthly maintenance since there is no mortgage payment.

The definition of ‘liquid assets’ varies by coop, so this is something you should have your buyer’s broker investigate if you feel that you may be short on liquid assets post-closing.

The easiest way to calculate how much co-op you can afford in NYC is to divide your monthly income by 4. The result is how much you can afford to spend on your mortgage and co-op maintenance payment based on a 25% DTI (Debt-to-Income) ratio.

Here’s an example: Let’s say your monthly income is $20,000. Diving this by four gives a maximum mortgage and co-op maintenance payment of $5,000.

If you’re buying all-cash and assuming you have sufficient post-closing liquidity, you could buy a co-op which has monthly maintenance of up to $5,000.

If you’re financing, you would subtract the co-op’s monthly maintenance from $5,000 to calculate your maximum mortgage payment. If the loan size based on this mortgage payment is not sufficient to cover the purchase price, you’ll need to find a co-op with lower maintenance, put down more money or receive a gift.