Residential

Qualifications for a Conventional Mortgage

When applying for a mortgage to buy real estate investment properties there are certain items that lenders like to see from an applicant. Job history and job security are two items that help during this process. The longer you have been at your job the better. If you recently just moved to a new job this doesn’t mean you are ineligible as there are many compensating factors for this that lenders understand. They like to see that your new job is within the same industry as you have previously worked in and have for many years, this makes a stronger case to them.

Credit Score and credit history are very important to lenders. A Borrowers credit score is one of the main items that banks and lenders look at during the underwriting process. Mostly all residential lenders use your middle score, which is more clearly defined as the score that is remaining when you remove the highest and the lowest score, which would be your middle score remaining. The three credit bureaus that lenders most commonly use to derive a borrower’s credit score are known as TransUnion, Equifax and Experian. From the results of this, lenders can see a snapshot of an applicant’s credit history and their credit worthiness based on set parameters and comfort levels by lenders.

Every lender is a little different, but typically your middle credit score must be a 680 or higher for investment purposes and the down payment amount is typically between 20-25% for Single Family purchases and 25-30% down for 2-4 units depending on the number of properties already owned by an individual applicant. Every lender is different in the maximum amount of properties they will finance for a borrower, but typically this is between 4-10 properties for institutional mortgages and once the maximum amount is reached for qualified borrowers, there are other alternative financing options typically available at higher rates.

Timelines

From the time you apply for a mortgage until the time you close escrow, the typical escrow period is typically 30 days or less. This includes getting the lender all required documentation, ordering an appraisal, satisfying any outstanding lender conditions, ordering property insurance and scheduling the closing with a title company. This is under the assumption the property you are applying for mortgage on is completed and appraisal ready. If there are construction delays then the aforementioned time period would only be applicable to real estate investment properties that are completed.

Timeline Summary:

Days 1-7: Mortgage application submitted and reviewed

Days 8-14: Appraisal completed and reviewed by lender

Days 15-21: Satisfying any last conditions and getting a clear to close by lender

Days 21-28: Scheduling Closing and coordinating insurance

residential