Loan Approval Question

4 Replies

Will lenders approval a loan if you bring them a great deal?

Although I may not be in a perfect financial position to get approved for a loan to purchase an investment property, ( credit score, income, debt, etc) I’m wondering if a hustle and look for a deal, do I have a chance to get approved? Any feedback would be greatly appreciated. Thanks in advance.

@Mikal Quintanilla - The short answer is that it depends. Do you have any prior experience with rentals and/or do you own your own home? The main thing that lenders look for are credit, capacity, and collateral. Usually, lenders want to see above a 680 credit score for an investment property that you won't be living in. For capacity, that just means that they want to ensure you have consistent,stable, and reliable income to repay the loan. This can include a typical W2/1099 job, rental income, etc. No bank will issue a loan if they determine you won't be able to pay it back. If you have history with rentals, then they will likely be more willing to use the rental income to help you qualify. And for collateral, that just means putting cash down on the property (skin in the game). Banks have found that borrowers are far less likely to default if they have skin in the game and in the event of a default, a bank wouldn't want it to be for the whole amount.

As far as getting preapproved goes, no lender or underwriter will conduct a personality test to determine if you have hustle- it's a numbers thing for the banks to calculate the risk. If you have credit, capacity, and collateral of the above then you should be able to get approved. And keep in mind, I'm only speaking in reference to your typical forms of financing. Things may be totally different for a hard money lender.

@Elise Marquette

Wow, Elise...thank you very much for taking the time to provide this insight. This is very very helpful. As I am very new to Real Este Investing, lending, funding deals, etc, this has given me a good understand on how to best position myself to apply and get approved for a conventional loan. The honest feedback is exactly what I needed. Again, this is greatly appreciated!