Lending Criteria for new buyers

[Abdul Jami]

Write your postHello all,

I'm new to this forum as well as investing and I'm hoping that you may be able to provide me with some anwers . With a multi family property (3 units or more ) do lenders only consider the traditional factors such as credit score and income ? Or will they take into account other factors such as the potential rental income and the after repair value when deciding to lend or not ? 

[Mike Warder]

Typically for four units or fewer, lenders are looking at the borrower's credit worthiness (debt, income, etc.) and habitability of the home (any major repairs necessary?). Larger multifamily units are evaluated differently by banks because commercial loans are often used. Commercial loans usually require more money down as well, sometimes 30%. Rental incomes are an important component to a bank's commercial loan evaluation. Basically, the bank will want to see whether the rental incomes and your ownership plan will put you in a position to pay back the loan. That said, a bank is still going to want to see that a borrower on a larger multifamily is also a good credit risk.