Rich Dad Education – Real Estate Blog

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Mortgage Loans

Mortgage Loan

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.

  1. The lender wants to see two to three years of tax returns.
  2. The lender is looking for a debt to income ratio of 38 – 45%.
  3. 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

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9 responses to “Mortgage Loans

  1. Milan Chymcak September 12, 2013 at 2:21 pm

    What exactly “The lender is looking for a debt to income ratio of 38 – 45%” means ? I am not from U.S, but it means that if I have for example 10.000 dollars per month, my debt can be only up to 4.500 dollars per month ?

  2. Shelly September 13, 2013 at 8:16 pm

    Why would a loan be based on value of property rather than purchase price?

    • Rich Dad Education September 16, 2013 at 12:43 pm

      It depends on the lender. A lot of hard money lenders recognize that you are going to be rehabbing the property and so they will base everything on the ARV instead. This helps you out. Traditional lenders will base everything on the purchase price.

  3. Doug September 18, 2013 at 5:12 pm

    I just recently purchased a foreclosure on the courthouse steps for my daughter (7/2) and we fixed it up a little and I was going to sell it to her for the cost of the repairs and I’m not making any money on it because, well, I’m the dad and I love my daughter and wanted to bless her. I was giving her the gift of equity (and the appraisal came in where she’s going to have about 30K in equity in the house. We went to the bank and she applied for the loan and the bank knew I had just purchased the house and because she would have so much equity in the house we were going to go conventional where she wouldn’t have the mortgage insurance payment. Well, the bank ordered the appraisal and they were approved but now they are saying Freddie Mac and Fannie Mae says I have to own the house 6 months and 1 day or else they consider it flipping. This just burns me up. Why the hell is the government telling me how long I have to own something and is there any way around this other than going to a FHA loan? I wanted to do the same thing with my son and I had found him a cute little house that he would be able to buy and have about $30K in equity in, but I was going to need my money back from this deal before buying that one as I had paid cash for this house I’m selling my daughter.

    • Rich Dad Education September 19, 2013 at 1:30 pm

      It is amazing how much control banks have over the market right now. You will run into the same problem with an FHA loan. This is something that everyone needs to be aware of. You should go in and brainstorm with your lender on ways to make this work. This is also a reason why you will need to budget a hold period for properties.

  4. onlineeducationindiajain October 26, 2013 at 5:47 am

    hi sir,
    i am need to some education loan related information i am impressed your article.

  5. myspace.com March 30, 2014 at 5:15 pm

    Thanks , I’ve recently been searching for information about this topic
    for a while and yours is the best I have found out so far.
    But, what concerning the conclusion? Are you sure about the supply?

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