Once you have done the search, the research, the analysis, gathered the down payment and gone to considerable effort to negotiate the deal … you don’t want to lose it all with a mistake on your loan application.  What are 3 mistakes you can avoid in a loan application for a multi-family investment property?

1)      Failing to produce all the required documentation, especially copies of the rental contracts for all occupied units.  Lenders discount the rental income to allow for future vacancies.  You don’t want to jeopardize the required ratio of income to expenses due to a lack of documentation.

2)      Mistakes in the required ratios:  Loan to Value; Debt Service Coverage Ratio and Personal Debt Coverage Ratio.  Missing the ratio required by the lender can stop the loan in its tracks.  Lenders want to know that the property is worth enough to justify the amount of the loan; that the income net of expenses is enough to cover the mortgage; and that you are not at risk of financial collapse, thus jeopardizing your loan payment.

3)      A background profile or resume that doesn’t make the case for adequate property management.  You may be relying on a hired property manager, or management may be all up to you.  In either case, ultimately you are responsible for ensuring the maintenance and tenant management of your new property.  Your credentials are frequently required, along with those of a professional manager if you plan to have one.  Make sure your lender knows that the property is managed for success.

Particularly for formal institutional loan applications, if you fail to meet any of the criteria, no matter how detailed or redundant it seems, the loan may not be approved.  You’ve worked too hard putting this deal together to lose it on paperwork!  Turning in a complete and thoroughly-documented loan application is part of the process for successful multi-family property investing.

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