Tips for Lender approval and what effects your cost of money

Real Estate Broker/Owner with eDrake

Tips for Lender approval and what effects your cost of money and getting a loan.
Credit scores at or above 740 will receive the most favorable loan percentage rate.

Multi-family rates are generally around 4.25% for good credit scores, the lower the credit score the higher the rate.

Buying a multi-family house, the bank will apply 75% of current verifiable rents collected toward your buying power.

Your mortgage lender will want to know a lot about you before approving your loan application, and justifiably so; it and its underwriters want to be assured that you meet their minimum level of creditworthiness before lending you money.

Here are the general areas of questioning you can expect from a lender: Employment and income: 1. Where do you work?
2. How much do you make?
3. How long have you been at your job?
4. How is your income derived -- steady salary or irregular income?
5. If it's the latter, you may need to provide more details to obtain a favorable interest rate.

Outstanding debts: 1. What recurring debts do you have?
2. How much do you pay a month for auto loans?
3. Credit cards?
4. How much of your monthly pretax income do these debts consume?

Cash reserves and assets: 1. How much money do you have in the bank?
2. How much will be left after you pay your down payment and closing costs?

Down payment: 1. How much money are you putting down?
2. Is this your own money?
3. If not, is it a gift from your parents?
4. A nonprofit agency grant?

The following responses tend to work in your favor: Steady employment (two or more years) with the same employer or in same line of work.
Low debt: no recent major buys (such as automobiles) and a debt-to-income ratio of 36 percent or less.
Loan is for straight home purchase (or rate-and-term refinance).
Property is detached single-family home to be used as primary residence.
Down payment of at least 5 percent of sales price with your own money.
You'll have at least two months' worth of mortgage payments in the bank after closing.

These responses tend to work against you: Self-employed or contract worker.
High debt: credit cards maxed out, total debt-to-income ratio more than 36 percent.
Property is a duplex or condominium, to be used as a vacation home or rental.
No cash left after home buy and closing costs.
Down payment is 3 percent or less of buy price and money is borrowed.

Comments (1)

Mario Gattavara
IMPACT California Properties - Oroville, CA
(Lake Oroville Area)

Great insight.

Now we need to get clients and the general public on track to making things come together.

Make it happen!


May 15, 2014 03:45 PM