Important Borrower Strengths, Part 3
Published January 28, 2012
The last two weeks, we covered parts one and two of “The Borrowers Strengths Are Most Important to Qualify for an Apartment 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 getting an apartment loan, including, as a general rule, a minimal credit score of 680 and minimal credit card debt. In part two, we covered the requirement of having enough liquidity to qualify for an apartment loan. You need to have enough money for the down payment, the loan costs, and enough money in reserves after you get your apartment loan.
In this blog, we are going to cover the requirement of having enough net worth to qualify for an apartment loan. This is an important requirement because the lender wants to know that you have a strong financial balance. Generally, the requirement is that you have net worth of at least the value of the multifamily property you are acquiring. This net worth includes money in the bank, stocks, bonds, and real-estate holdings. The lender will find out from your personal financial statement, and documents such as bank statements, if you have enough net worth for an apartment loan.
You might ask, “Why is net worth so important to the lender in getting an apartment loan?” The answer is that the lender wants to know that you are a strong enough loan candidate to weather a financial storm. There are risks that go along with multifamily ownership. The lender can feel assured knowing that you have plenty of money to hold onto the property should there be a major financial challenge, such as a down cycle in the economy or a major repair problem.
Stay tuned for part four.
By Bruce Painter, Marketing Director