Angela is a real estate agent explaining to her client why the cooperative apartment they want to purchase requires a higher down payment than a comparable condominium. What is the primary reason for this difference?
Correct Answer
D) Share loans are considered higher risk by lenders due to personal property collateral
Share loans for cooperatives are secured by personal property (shares and proprietary lease) rather than real property, making them riskier for lenders. This increased risk leads lenders to require higher down payments to reduce their exposure, typically 20-25% for co-ops versus potentially lower amounts for condos.
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Related Topics & Key Terms
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A comparison of the major mortgage loan types—conventional, FHA, VA, and USDA—covering their eligibility requirements, down payment amounts, mortgage insurance rules, and best use cases.
Predatory lending refers to unfair, deceptive, or abusive lending practices that impose unjustified terms on borrowers, often targeting vulnerable populations. It includes practices like excessive fees, inflated appraisals, and unnecessary refinancing.
RESPA is a federal law that requires lenders to provide borrowers with information about settlement costs, prohibits kickbacks and referral fees, and limits escrow account deposits. It applies to federally related mortgage loans.
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