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I'm the new Treasurer for a NJ coop and am reviewing admissions applications.
Our by-laws only allow us to deny a purchase based on poor financials. Do any coops out there have a minimum credit score they try to stay away from?
What do you consider when looking at the credit report?
I totally agree with Marty about not isolating a credit score and make it the sole determining factor. There are many factors which affect a credit score, many of which are not relevant to a purchaser's ability to pay their mortgage and maintenance.
Our financial evaluation process is similar to Marty's. We look at two components - sufficient income to meet monthly non-discretionary obligations (mortgage, maintenance, automobile, student loans, minimum credit card repayments, etc), and sufficient *liquid* assets to be able to meet obligations for 3-6 months in case they lose their income.
By liquid assets I mean bank and investment accounts (and similar). We will include retirement accounts because they can be tapped in an emergency. What we give very little weight to are owned real estate, tangible property, items with collector value, etc, because these many not be easily converted to cash.
If income is provided from a trust we may ask for a copy and have our lawyer review it to make sure the terms allow for sufficient monthly disbursements.
If a purchaser is on the borderline, it's not unusual to ask for 12 - 24 months of maintenance payments be put in escrow for a couple of years, or to ask for a guarantor of the maintenance payments. Your attorney can help you set these up.
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I'm looking to approve someone who can pay their monthly bills if I approve their application.
I'm not making their credit score the only thing I look at. For me, I'm looking at how much they owe now and how much debt they have to pay each month.
The credit report breaks down these debts into 2 types: 1) regular credit card debt and 2) other debt like student loans, car loans, and mortgages.
I then weigh their income against their monthly debt, also considering food and other usual monthly living expenses.
Then I decide if they can meet their expenses based on their income.
A credit score can be impacted by an event that happened long ago. If the applicant is on the straight and narrow as of now and keeping their debt manageable, then that's what I'm emphasizing today.
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