FHA Loans No Big Deal in Manhattan Because All Real Estate is Local

Real Estate Agent with Compass

There has been a lot of discussion lately about FHA loans. There have been numerous articles not only in respected publications like the NY Times and the Wall Street Journal, but from local blogs and websites.

Many seem to confuse Manhattan with the 4 other boroughs that make up the City of New York. There are many single family houses in Queens and Brooklyn, the Bronx and Staten Island.

In Manhattan about 75% of available housing is in rental buildings. Of the approximately 25% of housing available for ownership about 70% are cooperatives.

    * FHA does not give loans in Coops. The remaining apartments for sale in Manhattan are condominiums.

    * Most Manhattan condos (approx: 98%) have "first right of refusal" 
FHA does not give loans in buildings where there are any "restrictive covenants" right of refusal is a restrictive covenant.

In all of Manhattan there may be about 15 condominiums that have applied and been approved for FHA loans. They are new developments primarily in Harlem, financial district, east village "up and coming neighborhoods" "They are usually in new construction buildings that have had problems selling units.

FHA is a government agency that insures the loans issued by private lenders. The government guarantees the loan payment to the lender if the borrower/home owner defaults. FHA loans traditionally are for people who have less than 10% for a down payment. FHA loans allow 96.5% financing (3.5%) and for people who don't have good credit scores.

Because of all the hype people qualified for conventional loans are asking about FHA loans. An agent called me about a coop listing I have. He told me his buyer are very qualified and they are pre-approved for an FHA loan. I said that's nice but FHA doesn't give loans in coops and even if they did the coop has a minimum down payment requirement.

Interest rates are at all time lows. There are many loans out there today. Call a mortgage broker or banker located in Manhattan. Make sure you tell them you are looking at buying a coop or a condo in Manhattan. Manhattan is an Island. Everything is different here.


Mitchell Hall, Associate Broker, The Corcoran Group

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Eileen Hsu
Douglas Elliman Real Estate - Manhattan, NY

Very well said Mitchell. Everything is different here in Manhattan New York. Name another that has 85% +/- of Co-Ops other than New York...!

Aug 03, 2010 03:28 PM #1
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices


i guess the difference is still not that much in that it is an island, but because it is Manhattan. Staten Island is... an island, but everything is different there, including the breakdown of type of  properties. And I am sure Co-Ops will be at the bottom of the list

Aug 03, 2010 03:32 PM #2
Mitchell J Hall
Compass - Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Thanks Eileen. Nobody understands our peculiar housing market except us. I like being different.

Aug 03, 2010 03:38 PM #3
Mitchell J Hall
Compass - Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Jon, Good point. It's different because it's a tiny densely populated island with little land and our housing is different.  Staten Island is very different than the rest of New York City too. It's very suburban, beautiful homes.

Aug 03, 2010 03:41 PM #4
Rodney Mason
Guaranteed Rate - Atlanta, GA
Licensed in AL, FL, GA, SC, & TN

Financing options for co-ops are definitely very different than any other property type.  Manhattan definitely has its niches in that respect.  Financing is not as one size fits all as some buyers and agents would like to believe.

Aug 03, 2010 03:59 PM #5
Jeff Dowler, CRS
Solutions Real Estate - Carlsbad, CA
The Southern California Relocation Dude

Mitchell - it's interesting HOW different Manhattan is in terms of real estate. This is important information for buyers to have since many, particularly those who are first timers or new to the area, likely have no clue how unique it really is.


Aug 03, 2010 04:12 PM #6
Roger D. Mucci
Shaken...with a Twist 216.633.2092 - Euclid, OH
Lets shake things up at your home today!

Not too many understand the NYC market..............it's quite unique.  Minimum down payments on co-ops make it a horse of a different color.  Great post for anyone relocating to NYC that is not familiar with the differences in real estate from most places.

Aug 03, 2010 04:49 PM #7
Ruthmarie Hicks
Keller Williams NY Realty - 120 Bloomingdale Road #101, White Plains NY 10605 - White Plains, NY

Manhattan is a whole other animal.... I'm in Westchester - and at the lower entry level the situation is somewhat similar.  Coops and Condos with restrictions.  But the single family housing market still allows FHA.  Some buyers have been pushed towards a real "fixer upper" of a home rather than a beautifully turned out condo - which would be more suitable for their situation - given that they can get FHA for the house.  Since interest rates are low, I encourage them to look at what makes the most sense for their lifestyle.

Aug 03, 2010 06:30 PM #8
Mitchell J Hall
Compass - Manhattan, NY
Lic Associate RE Broker - Manhattan & Brooklyn

Rodney, Thanks when i get a listing i try to pre-approve the building right away. A lot of buildings are having problems now getting financing. If financing is problem I may need to find a buyer with a lot of cash.

Jeff, Thanks, It can get compiicated here. A good broker is essential.

Roger, Not only minimun down payment 20-25% but income to debt ratio 25% or less plus cash left over to cover 1 year in mortgage and maintenance payments or 2 years worth of maintenance. Coops sometimes require a year of maintenance in an escrow acount from a buyer they deem marginal.

Ruthmarie, I agree. I wouldn't buy a home based on a loan or a tax credit. Lifestyle and quality of life should come first. Some of the most coveted prestigious buildings on Park Avenue and 5th Avenue are coops. They require all cash or only allow 50% financing, a high net worth, interviews, reference letters etc. Some require essays. Wall Street money is out of favor now and bonuses don't count as income.

Coops also get the first lien on the property. Lenders are second in line. A coop can reject a buyer without having to give a reason.


Aug 04, 2010 06:19 AM #9
Patricia Kennedy
RLAH Real Estate - Washington, DC
Home in the Capital

Mitch, there are very few FHA approved condos here in DC, and for the single family homes, the prices are usually too high for an FHA loan to work.  Even when they do, listing agents (me included) try to avoid them.  We've had a lot of nightmares with both appraisals and underwriting.

Aug 05, 2010 01:21 AM #10
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Mitchell J Hall

Lic Associate RE Broker - Manhattan & Brooklyn
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