How to Resolve Home Financing Problems with Cooperative Apartments and Fixer-Uppers

Getting a mortgage on two types of residential property, cooperative apartments and fixer-uppers, can be difficult. This article simply highlights the financing problems associated with these types of properties.

Cooperative apartments

When you buy a house or a condominium apartment, you get a deed that proves you have legal title to the property. Nice and simple, is it not?

When you buy a cooperative apartment usually called a co-op, you get a stock certificate, which proves that you own a certain number of shares of stock in the cooperative corporation. You also get a proprietary lease, which entitles you to occupy the apartment you bought. The cooperative corporation that owns the building has the deed in its name. Confusing, isn’t it?

In places such as New York City where co-ops are common, mortgage financing on this type of property is readily available. In many other parts of our great land, however, lenders find co-ops legally daunting. They don’t make co-op loans because they refuse to accept shares of stock in a cooperative corporation as security for a mortgage.

Compounding the problem, some co-ops won’t permit any individual financing over and above the mortgage that the cooperative corporation has on the building as a whole.

Unless you’re independently wealthy don’t buy a cooperative apartment if only one or two lenders in your area make co-op loans. You’ll likely end up paying a higher mortgage interest rate due to limited competition and the lenders’ concerns about the risks involved with co-op financing. Worse, what happens to you if these lenders stop making co-op mortgages and no other lenders take their place? You won’t be able to sell your unit until you either find an all-cash buyer (rare birds, indeed) or you decide to carry the loan for the next buyer,


Fixer-uppers are properties that need work to put them in pristine condition. If the house you want to buy only needs cosmetic renovations (painting, carpeting, landscaping, and the like), you probably won’t have a big problem obtaining a mortgage.

However, suppose that the apple of your eye is a house that needs serious structural repairs, such as a new foundation, a new roof, and the installation of new electrical and plumbing systems. We have to question the wisdom of buying such a needy property. lf your dream house is a corrective-work nightmare, getting financing may be tough. Don’t say I didn’t warn you.

Getting financing is difficult whenever corrective work repairs exceed 3 percent of the property’s value, which is always the case with a major fixer-upper. A good real estate agent will know which lenders in your area specialize in financing this type of property lf the lender finds you creditworthy and your project feasible, the lender will probably give you a mortgage to buy the property and a construction loan to make the necessary improvements.

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