Applying for a Mortgage Loan
What kind of loans do the banks have for single family homes up to four units for non-owner occupants?
There are loans for owner occupied and non-owner occupied buyers. There are loans for buy fix and sell properties; there are loans for buy fix and hold properties too. As the investor, you need to find out what kind of products each bank has so that you know which kind of loan you are interested in.
Once the bank explains what kinds of loan products are available, you want to find out the terms they have for that product. Some of the terms to look into are the loan to value, the interest rate and the length of the loan.
Once the bank determines the loan to value, rate and the term of the loan, then you can estimate the loan amount they will give you for a certain property. For example, a $200,000 property with an 80% LTV is $160,000. This lets you know how much money you will need to bring to the closing table. You also want to find out if the loan is based on the value of the property or on the purchase price.
You can estimate the monthly payment on a loan using a loan calculator. However, you need to know the length of the loan as well as the interest rate. You also need to remember that the payment will be determined by whether or not the loan is interest only or fully amortized. If you are keeping the property as an income property, you need to figure in taxes and interest as well.
Most banks have similar qualifications in terms of what they want from the borrower.
- The lender wants to see two to three years of tax returns.
- The lender is looking for a debt to income ratio of 38 – 45%.
- The lender is looking for a certain credit score.
Debt, for example, includes credit card payments, student loans, car loans, furniture loans, etc. If you are already at your 38-45% of your gross pay, then you will not be able to make a mortgage payment on a new loan. Therefore, you are going to have to bring in someone else to qualify and sign on the new loan.
Richard Maryanski & Erik Maryanski
Rich Dad Education Elite Trainers