Co-op Board Requirements
The minute that you decide to purchase a co-op you should start getting ready for your board approval. Every co-op is different so there is no clear cut formula to find out what all co-op boards in Manhattan are looking for in a perspective buyer. The number one item that they focus on in a buyer is their financial stability. This includes work history, debt to income ratio, and liquid assets. Before submitting an offer you should ask the real estate broker or the seller about the board requirements.
Boards want to see a solid work history for at least two years. They will ask for 2 years of tax returns, the last two pay stubs, and a reference letters from your employer. If you are self employed you will need to provide an extra year of tax returns and a letter from your accountant verifying your income. Some boards allow guarantors to financially back-up buyers who do not meet the employment or income requirements.
DEBT TO INCOME RATIO
Most boards want to see the debt to income ration at around 25% to 33%. This means that your monthly salary needs to be 3 to 4 times your monthly revolving debt.
Formula to calculate your Debt to Income Ratio:
Debt to Income Ratio = Monthly Revolving Debt/Monthly Income
Liquid assets are cash, stocks, and bonds (or anything that can be easily converted to cash). Boards will want to see that you have 12 to 30 months of liquid assets post closing to cover your expenses.
Some boards allow money to be gifted to buyers who do not have enough money to make the down payment, and to meet the post closing liquid asset requirements.
The down payment requirements are indicators of how stick a board is when it comes to the buyer’s financials. A board that requires a 50% down payment will have stricter requirements than the one that requires 20%.
When you make an offer the listing agent or buyer will ask you to submit the REBNY Asset & Liability Statement. The information on this form provides a snap shot of your ability to afford the apartment.