3 Reasons Lenders Scrutinize Investment Property Loan Applications

When applying for an investment property loan, you will quickly find out that lenders are going to scrutinize every last detail. Here are a few reasons that lenders are so strict with investment property loan applications.

1. Second Mortgage

Typically when someone is applying for an investment property loan, they also have another mortgage that they are responsible for. Anytime you are dealing with a second mortgage, the lender is going to be more critical of the application. They want to make sure that you have enough money to cover both mortgage payments even during tough times.

2. Rental Income

Many that apply for investment property loans are planning on using the money from rent to pay the mortgage. Although this can work, many banks will not allow you to account the entire amount of the rental income. They know that it can be very difficult to keep a property rented 100% of the time and will only allow you to count a portion of this income on your application.

3. Renter Problems

Another reason that lenders scrutinize investment property applications is because you will be dealing with renters. Renters of property typically do not take care of the property as well as they would if it was their own. Lenders know this and they also know that it can be a significant financial problem for the owner of the property.