What do bankers look for in a real estate deal?

As an investor, there are a number of factors which make a deal appealing to you.  They may include great cash flow, tremendous upside in equity and multiple exit strategies for disposing your property.  One of the many steps you must consider when purchasing an investment property is what your banker looks for when signing on a mortgage agreement. Having to look at the deal from someone else’s perspective is not as simple.  However, here are a few rules of thumb to help you out

1)  Credit rating. Having been current with all your payments including utilities will be a plus when speaking to your banker. They like dealing with people who pay their bills!

2)  Down payment. The larger your down payment, the more positively you will be presenting yourself as someone who is willing to take a risk with the bank. Low money deals mean the bank takes most of the risk and this is not a good thing for them! You need to have your skin in the game. By all means, please do not ever max out your credit cards for a down payment.  This is insanity at its worst and will only lead to trouble!

3)  Capacity to pay the mortgage.  If you are making $5/hr and expect to obtain a 2 million dollar mortgage, chances are you will be turned down. You must have the ability to make the bank comfortable in lending you money. Your capacity to pay them back in this case will not work. The bank is asking themselves if you are able to make the payments long term.

4)  Charisma is a vital factor. If you have a personal relationship with your banker and know them one on one, your chances of being approved have just gone up.  People like dealing with other people and most of the time, they just want to help you out. Send them a thank you card/Christmas and birthday card throughout the year.  You never ever know when they could help you out again.