There are easier approaches to getting prepared for a mortgage submission and there is a harder, more stressful route. Why not learn from the mistakes of other borrowers, experience a less stressful process and increase your mortgage options.
I am going to delve into the action items you can do to relieve your mortgage application headache. I am continuing this list from part 1 & 2 (see blog here and here). There is lots to learn, stay tuned for more.
Items below aren’t necessarily a deal breaker, as there are mortgage solutions for all types of applications, but collectively these items will increase your mortgage options. Also noted are some items unique to real estate investor applicants.
18. Have an income outside of just rental income, if you want access to the most amount of lenders. Many lenders do not like to see too high of a reliance on rental income. Fulltime investors are in a unique category, most lenders (but not all) want income from other sources, in case your real estate empire crumbles.
19. Similar to the point above, understand that lenders may calculate your rental property cashflow differently. They often have a much more conservative approach. Having leased properties is important, of course, but don’t be surprised if lenders aren’t scooping up your income from rentals to heavily subsidize your current application.
20. To broaden your mortgage options, investors financing rental property should consider scenarios with 25% downpayment, not just 20% downpayment. There usually are ways to do even less downpayment, but often that may not fit into the property cashflow goals.
21. As mortgage policies keep evolving, it is prudent to run your calculations at 25 years amortization. This amortization already applies to any mortgage under 20% downpayment subjected to mortgage insurance, but it is now common to see lenders applying this amortization across many of their other programs, including rental property. Longer amortization is possible, but with 25 years amortization you are expanding your lending options.
22. Have online access to your banking and financial statements and Canada Revenue Agency account. Getting these records offline is possible, but it makes it some much easier to get instant up to date information online, especially when you have a pressing financing condition deadline.
Stay tuned for Part 4.