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The Paperwork that Comes with Rental Property Loans

By Ruth Racey
Published: Monday, December 7th, 2009

Dealing with your mortgage lender does not really have to be an excruciating experience. In fact, as long as you come prepared, the whole procedure can actually run smoothly. That is, as long as you have all the necessary paperwork ready – and this is a huge part of the preparation that you need to take on yourself. With that said, it then becomes important to know just what major paperwork you will need to have on you before you proceed doing business with your mortgage lender.

First off, you should prepare an estimate of what would be your rental income. Your rental property, after all, is an investment, and your lenders would then take note of its potential cash flow. Good for you if you already have tenants occupying your rental property because all you have to do now is provide written proof of your occupants’ monthly payments for rent.

However, if your property does not have any tenants yet, then you should enlist the services of a real estate professional. This way, he or she can provide a valid written estimate of your property’s potential rent payments.

A quick note though: most lenders would actually require your income to go beyond 125% of your monthly mortgage payments. This way, your lenders would feel confident in your ability to make your monthly rental property payments. You also have to keep in mind your monthly fixed costs in terms of maintenance, utility bills, and repair costs.

Secondly, you also need to prepare official records of your monthly income and earnings. Your salary plays a very important role, especially when you are still processing your loan application. Make sure to produce official written records of your income tax statements, your pay slips, and your bank account statements as well. As a general practice, lenders require that the personal earnings of their applicants be 3 times more than the monthly mortgage payments. This is to ensure that you would still be able to make your monthly payments even if your tenants leave your establishment and your rental income starts to slip.

Lastly, make sure to prepare your credit report, as well as official records detailing your debt history. Your credit report is vital here because this will be used to check how much money you owe your credit card companies and if you have been paying them in full and on time. The same goes for all other types of loans, such as car installments and home mortgage.

Make sure you include all of these and other relevant records and documents that you can think of so that your loan application will run as smoothly as possible.

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