Post-Closing Liquidity in NYC Real Estate
You need far more than a down payment to buy a co-op in New York City. When buying a co-op in NYC, you will need to meet the building’s post-closing liquidity and debt-to-income ratio requirements. Many co-ops have specific requirements, while others take a holistic approach to evaluating a buyer’s financials. This information, along with just about everything else about you, will be presented in your board package to the co-op board before they decide whether to invite you for an interview.
What is Post-Closing Liquidity?
Post-closing liquidity means the amount of liquid funds a buyer will have after he or she closes on their home. Buyers should consider what their liquid assets will be after their down-payment and closing costs are paid.
What Do Co-Ops Require?
Generally, co-op boards will require post-closing liquidity of 24 months of your mortgage and maintenance payments. You should aim to have 24 months of cash or cash equivalents post closing. Of course, there are some buildings that require far more.
What Is Considered Liquid?
Generally, if you can convert your asset to cash in a day or two, it is considered liquid. For example, the cash surrender value of your life insurance plan would generally be included in the calculation, but the death benefit would not be included.
Buildings consider different assets as “liquid,” like your 401K and deferred compensation. Some will factor in your vested 401K and other IRA assets, while other buildings will not consider this at all.
Calculating Your Post-Closing Liquidity
When you prepare your REBNY financial statement, we will assess your post-closing liquidity for each property you are interested in to determine whether you are qualified to pass the co-op board. We will factor in the buildings monthly maintenance, assessments, your monthly mortgage payments, and taxes/mortgages/rental income on any other properties you own.
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