What to Include in Binder for Lender?

Question

Hi all  -  I've heard that it's a good idea to create a "binder" of basic documentation (both personal and related to a property) when approaching lenders about purchasing an existing rental property.  I would be purchasing directly from the owner (ie: no agents involved).  I'm curious what others may have included if they've done this?  So far I'm thinking of including the following:

• auditor web site info (including pics) of property to purchase
• property rental history for last year (from existing owner)
• last year's tax returns
• most recent 3 months pay stubs
• personal net worth statement
• what I intend to do with property short term and exit strategy

Do others have additional thoughts or provide additional direction?

Thanks in advance!

Dave

Bill Gulley · Answer

Dave, last two year's tax returns with all schedules, last pay stub (sufficient with tax returns, if returns are not needed, you'll need the three stubs) & copy of all deposit accounts and savings/retirement accounts. Last credit card statements showing an average balance. A list of current loans with amounts owed, remaining payments required and payment. If you have a financial statement, balance sheet,  on your business you should have that, you won't need an income statement with a tax return.

You need a copy of your sale contract and all addendums. Copy of any lease in force that you will be assuming, if any. An estopel letter, a letter where any existing tenant confirms the terms of the lease is nice to have. Otherwise, don't clog up files with RE data or valuations. A statement of what RE taxes will be is nice too as well as an insurance bid for a policy. If you have the seller's property tax information, schedule only, that would be helpful.

Your application will cover your assets, liabilities and income. If you have other properties you will need the amount of mortgages, the payment, taxes, insurance and lease amounts with an estimate of value, if owned for less than a year the value will be your purchase price/cost of acquisition. Copies of other leases.

Lenders don't really care what the seller's property records are, they can be manipulated and they only pertain to them under their management, not yours, so such are limited to only factual matters, such as existing taxes or HOA fees and any current lease to be assumed. They will get an appraisal and go off of that.

Make sure you have a picture ID, social security numbers of all who will be signing the note with their name as appearing on IDs and their SS#. You'll need any Tax ID #s as well.

All of this will make the application process much smoother, for a SFD rental and should help in processing the loan. The loan officer should be impressed! Good luck. :)

Jonathan Casillas · Answer

As a loan officer myself what Bill explained is a perfect start. I would love if people came that prepared when asking for a loan. It would make the process much smoother anid quicker to get through.

Dave M. · Answer

Bill,

Hey, thanks for taking the time to draft such a comprehensive reply!  It looks like I have a lot more paperwork to gather.

I really appreciate your suggestions!

-Dave