Important Borrower Strengths, Part 2
Published January 19, 2012
Last week we covered part one of “The Borrowers Strengths Are Most Important to Qualify for a Multifamily Loan.” In getting multifamily financing, we shared five strengths needed to get your apartment loan. They are being strong in credit scores, liquidity, net worth, income, and a lender may require that you have multifamily experience (ownership of a multifamily complex of 5 or more units) to get an apartment loan.
In part one, we highlighted the strength requirements of credit scores for apartment lending, including, as a general rule, a minimum credit score of 680. Also, you need minimal credit card debt, and a record of being on time for your mortgage payments. See part one posted last week to get other credit card requirements needed for apartment financing, one of the types of commercial financing.
In this blog we will cover the requirement of having enough liquidity to qualify for apartment lending. Why is having enough liquidity important in apartment lending? First, you need to have enough money for the down payment and the loan costs for multifamily financing. Second, you need to have enough money, including in the bank, stocks, or bonds, after your down payment and loan costs. This is because to get apartment loans, the lender wants you to have plenty of money for reserves needed for repairs and also for emergencies. These emergencies include things like a sudden major plumbing problem or an unexpected big roof repair problem.
The amount of liquidity you need for apartment lending varies with factors including the cost of the property, the number of units, and the particular requirements of the loan source. One other thing you need to know about the liquidity requirement for your apartment loan is that the money in retirement accounts doesn’t count in apartment financing. It wouldn’t be a smart move for apartment lending anyway, because generally there is a stiff penalty incurred for taking money out of retirement accounts.
Stay tuned for part three.
By Bruce Painter, Marketing Director