Sellers and listing agents use the REBNY financial statement to assess the financial status of prospective buyers. The statement covers a buyer’s assets, liabilities, monthly income, and projected monthly expenses.
This helps the agent or seller determine the potential buyer’s fitness to purchase a given home.
When buyers need to fill this out
Buyers typically need the REBNY financial statement to apply for co-ops. Co-ops are more likely to require the statement than condos because their standards are often especially stringent. However, some condos may still request it.
It is better for both buyers and sellers if unqualified buyers find out faster that a co-op or condo board will not approve them.
The buyer can find the statement online and fill it out at the beginning of their search process.
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How to interpret REBNY financial statements
Most prospective sellers and their agents will want to see that you have the money to make a down payment of at least 20% and cover closing costs. Most will also want to know you will be liquid for 12 to 24 months after closing. Again, this is especially true of co-ops.
You can determine post-closing liquidity by dividing your remaining savings by monthly housing costs. Therefore, if you have $3,000 in monthly housing costs and $60,000 left over post-closing, you have 20 months of post-closing liquidity.
Another important calculation is the debt-to-income ratio. To calculate this, you divide your monthly housing costs by monthly income. Therefore, to stick with our numbers from above, if you owe $3,000/month for a home and make $9,000/month, your debt-to-income ratio is 33%. If you have other debts, such as student loans, you have to add them to your monthly housing costs. In this case, then, a buyer with $1,000 in loan payments would have a debt-to-income ratio of $4,000-to-$9,000, or 44%. Most NYC co-ops want a debt-to-income ratio below 30%, if not 25%.
Finally, to calculate the debt-to-income ratio, you need to determine your projected monthly expenses. This is a combination of estimated mortgage payment and maintenance (co-op speak for what condos call common charges and taxes).
You may not need to submit a REBNY financial statement when making an offer on a NYC home, especially if you’re applying for a condo or new construction.
Sample REBNY financial statementREBNY-Financial-Statement
Link to the form above: https://blocksandlots.com/wp-content/uploads/2020/12/REBNY-Financial-Statement.pdf
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Top photo courtesy of 123 Fort Greene Place.