Final answer:
To finance a co-op purchase, an owner typically needs to secure a mortgage or loan and provide a down payment, often around 20%. Co-op financing can involve complexity due to the nature of cooperative ownership, where the buyer acquires shares in a corporation rather than real property.
Step-by-step explanation:
To finance the purchase of a co-op, an owner similarly to a homebuyer, must secure a mortgage or take out a loan. Co-op financing can be more complex than traditional mortgages due to the nature of co-op ownership. Here, the purchaser is buying shares in the cooperative corporation, which entitle them to a proprietary lease for the use of a housing unit.
When obtaining financing, the purchaser must provide a down payment, which is typically around 20% of the co-op's purchase price. The remainder of the purchase price is financed through a loan or mortgage. The borrower then makes monthly payments to repay this loan over time. It's important to note that some co-ops may have stricter financing rules, and some lenders may be hesitant to lend for co-op purchases as they consider it riskier than lending for a traditional home purchase.
Moreover, for potential co-op owners who may not have sufficient personal funds, there are other avenues such as receiving funds from angel investors or seeking assistance from various loan programs designed specifically for cooperative purchases. Such investors provide capital for a stake in the company, which in a co-op context translates to shares within the cooperative housing corporation.