Applications for co-op loans are underwritten in the same manner as applications for any residential loan.

A lender will verify sources of income and confirm the borrower’s financial obligations. The lender will then obtain the borrower’s credit report(s) from the consumer credit reporting agencies. The next step is the co-op unit appraisal which is performed by an appraisal firm that has been approved by the lender. Costs of the credit report and the appraisal are paid for by the borrower either separately or as a part of the lender’s application fees (check with your lender).

The lender may require a report of termite inspection prior to settlement depending on the type of unit, i.e. townhouse, or the location of the unit relative to the ground in a multi-family building. The report is ordered and paid for by either the seller or the purchaser/borrower as stipulated in the sales contract.

Hazard insurance, which covers the replacement value of the unit, is generally not a requirement because the replacement value of the unit being financed is covered by the co-operative corporation’s master insurance policy.

Typically, there is no title search performed on the unit because the ownership interest in the co-op unit is considered personal property.

A search of the non-land or chattel records in the Recorder of Deeds office is performed to determine if there are any issues which may encumber the seller’s ownership interest in the unit or affecting the credit worthiness of the borrower, i.e., tax liens, money judgments and the like.

Lastly, there is no survey requirement because no land or real estate changes hands in the transfer of a co-operative unit.

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