Parents Helping Children Buy or Rent NYC Apartments
Co-purchasing, Gifting, Guarantors
Many first time home purchasers are fortunate to get help from their parents. There are several ways parents can help their adult children buy apartments. There are several options depending on the building. The most common is gifting and or serving as a guarantor that will guarantee payments.
Gifting means the parent gifts their child a certain amount of money toward the purchase or down-payment. Lenders and coops will require a gift affidavit declaring the amount of gift. A gift is not a loan as a loan is debt that needs to be paid back.
Gifting, guarantors and co-purchasing are building to building specific. Some buildings may require co-purchasing as opposed to a guarantor and some buildings will not allow co-purchasing from a non resident.
In a condo it is very simple. A parent can buy for an adult child. A corporation and or a trust can buy a condo. Most condos have applications but many are very simple applications. I recently had a condo transaction where the couple obtained a mortgage from their parents. As far as the seller, listing agent and the condo were concerned it was a Cash Sale. I presented proof of funds with the offer. A condo may require documentation but they can't reject a buyer. They can only exercise their "right of first refusal" and purchase the apartment for the same price and terms of offer.
It becomes more difficult purchasing a coop and even renting in certain Manhattan buildings. Most coops will not allow a parent buying for their adult child. Many coops will allow co-purchasing or a guarantor for working adult children. Even if the parents pay for the apartment, the coop will want the adult to be working with their own income and be responsible to pay the monthly maintenance and/or mortgage payments. The monthly housing costs can not exceed 25-30% of the adult child's monthly income.
Some rental buildings may require the parent to be on the lease. Some may not accept out of town guarantors and/or may require a few months of rent up front and additional security deposit. 40x rent in annual income is required by applicant and 80x rent is required to be a guarantor.
The coop will want full financial disclosure from both the guarantor and the applicant and from both applicants if a co-purchase. A guarantor letter and a gift affidavit is usually required as well.
The only alternative other than a condo purchase is purchasing a sponsor coop apartment. The sponsor is usually the developer or owner of building when it converted to coop that still has shares These shares are "unsold shares" in the cooperative corporation. I recently sold a coop sponsor apartment to parents from out of state for their son that recently graduated college here.
Purchasing a sponsor apartment in a coop is buying "unsold shares" there is no board approval process. However once purchased the shareholder has to adhere to the coop rules, enjoys the same "quality of life" as other shareholders but when unit is resold there is board approval and a board package is required.
A "holder of unsold shares" may pass the same rights to an investor purchaser as long as the purchaser never moves into the apartment. In other words a sponsor can sell a coop unit to an investor and as long the investor never occupies the unit the investor retains all the same rights as the original sponsor. The investor "holder of unsold shares" does not need board approval to rent or sell the unit.
Many first time home purchasers are fortunate to get help from their parents. There are several ways parents can help their adult children buy apartments. There are several options depending on the building. The most common is gifting and or serving as a guarantor that will guarantee payments.
Gifting means the parent gifts their child a certain amount of money toward the purchase or down-payment. Lenders and coops will require a gift affidavit declaring the amount of gift. A gift is not a loan as a loan is debt that needs to be paid back.
Gifting, guarantors and co-purchasing are building to building specific. Some buildings may require co-purchasing as opposed to a guarantor and some buildings will not allow co-purchasing from a non resident.
In a condo it is very simple. A parent can buy for an adult child. A corporation and or a trust can buy a condo. Most condos have applications but many are very simple applications. I recently had a condo transaction where the couple obtained a mortgage from their parents. As far as the seller, listing agent and the condo were concerned it was a Cash Sale. I presented proof of funds with the offer. A condo may require documentation but they can't reject a buyer. They can only exercise their "right of first refusal" and purchase the apartment for the same price and terms of offer.
It becomes more difficult purchasing a coop and even renting in certain Manhattan buildings. Most coops will not allow a parent buying for their adult child. Many coops will allow co-purchasing or a guarantor for working adult children. Even if the parents pay for the apartment, the coop will want the adult to be working with their own income and be responsible to pay the monthly maintenance and/or mortgage payments. The monthly housing costs can not exceed 25-30% of the adult child's monthly income.
Some rental buildings may require the parent to be on the lease. Some may not accept out of town guarantors and/or may require a few months of rent up front and additional security deposit. 40x rent in annual income is required by applicant and 80x rent is required to be a guarantor.
The coop will want full financial disclosure from both the guarantor and the applicant and from both applicants if a co-purchase. A guarantor letter and a gift affidavit is usually required as well.
The only alternative other than a condo purchase is purchasing a sponsor coop apartment. The sponsor is usually the developer or owner of building when it converted to coop that still has shares These shares are "unsold shares" in the cooperative corporation. I recently sold a coop sponsor apartment to parents from out of state for their son that recently graduated college here.
Purchasing a sponsor apartment in a coop is buying "unsold shares" there is no board approval process. However once purchased the shareholder has to adhere to the coop rules, enjoys the same "quality of life" as other shareholders but when unit is resold there is board approval and a board package is required.
A "holder of unsold shares" may pass the same rights to an investor purchaser as long as the purchaser never moves into the apartment. In other words a sponsor can sell a coop unit to an investor and as long the investor never occupies the unit the investor retains all the same rights as the original sponsor. The investor "holder of unsold shares" does not need board approval to rent or sell the unit.
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