Sponsored: The Lowdown on Co-op Financing

  • January 11, 2012

by UrbanTurf Sponsor


There are currently more than 130 cooperative buildings in DC, accounting for more than 1,300 individual co-op units. Though condos have multiplied in recent years at a much higher rate than co-ops, DC’s first co-op building was organized in 1920, well before the first condo was established in 1963.

Owning a co-op is a lot like investing in a company whose purpose is to provide housing for its shareholders. Each tenant owns what could be considered stock in a building, while carrying proprietary leases for their individual units. However, the building—including common spaces—is owned collectively by the tenants as a whole. Co-ops generally have the same tax benefits as other forms of home ownership, and their fees usually include an underlying mortgage, as well as property taxes and amenity, maintenance and utility costs, which are split proportionally amongst the building’s units. (Monthly fees are therefore typically higher than those of condos, but it is important to realize that those co-op fees cover much more than condo fees.) Tenants have the power to democratically change building-wide policies and owner-to-investor ratios within the association. The housing corporation, however, owns the property title.

Co-ops are typically slightly less expensive than comparable condos, but while condo financing can be found for no-money down, banks require a minimum down payment of 10 percent on co-ops and have interest rates a bit higher than condo purchases.

BB&T specializes in co-op loans. Rather than selling co-op loans to Fannie Mae and Freddie Mac, BB&T bundles the loans in a portfolio, making the loan processing and approval more efficient while eliminating the need for private mortgage insurance. BB&T mortgage loan officer Matthew Rexrode explained that the benefit of the loans being kept in house is that the bank is not required to go to the co-op association every 60 days to get various verification documents, like other lenders are required to do, which eases the buying process in many ways.

Here is a chart of how a co-op purchase stacks up against a condo purchase:

For more information about the co-op financing, contact Matthew Rexrode at 703-841-5020 or via email at .(JavaScript must be enabled to view this email address).

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This article originally published at https://dc.urbanturf.com/articles/blog/sponsored_the_lowdown_on_co-op_financing/4651

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