Real Estate Secrets: Know What Matters to an Underwriter

Real Estate Secrets: Know What Matters to an Underwriter

Over the years, I’ve been in and out of real estate investing. I work in it, teach in it and love it. And my years in real estate, through market lows and highs, have taught me a couple of secrets. One of the things I’ve learned is how to interact with underwriters–know what they are looking for, what matters to them, and how they do their job. The following list is some of the things I’ve learned to be prepared for!

  1. Credit Score–Underwriters are looking for strong credit scores. Check out my other two blogs about credit scores here and here.
    • Anything above 720 is a $250,000 kind of score.
  2. Capacity–Be prepared to share just about everything. Underwriters want to see all income and assets documented–as well as have an idea of how you’re living.
    • Full Document Loan
    • DTI (debt-to-income ratio) of 28% is ideal. (for mortgage. 36% for all)
    • Documents–taxes, pay stubs, VOE (verification of employment), VOA (verification of accounts)
  3. Collateral–Collateral is definitely something that matters to underwriters. This is the protection, without it the institution is vulnerable. Study up on mortgages and borrowing before going moving ahead. You’ll want to know as much as the underwriter when it comes to this field.
    • LTV: Loan-to-value ratio. (Ideally high–80% or more. Determined by appraisal first mortgage 80%)
    • To 90% With Mortgage Insurance
    • Most borrowers do 80/10/10
    • For higher LTV ratios you can do 80/15, 75/20, or even a 75/25 for a 100% loan
  4. Character–Beyond all of the previous areas, underwriters want to see strong character! Be someone they can trust.
    • Time on Job: Minimum of 2 years. Bring VOE.
    • Time at Residence: About 2 years.
    • Your Age (50 is better than 30)
    • DTI. Get your debt-to-income ratio under control–not more than 40%!
    • Assets – down payment + 6 months reserves. Bring VOA.
    • Seasoned Funds 60 days
    • Two Years Tax Returns
    • Number of properties owned
    • Last two months of pay stubs

Some real estate investors, primarily business owners or those self-employed, will bring their stated income or verified assets into the game after beginning to accumulate properties. The rate for this is higher, but it is easier if you have a strong credit score.

What’s a secret you’ve learned in real estate investing?

Thank for reading! I’ll be back for more real estate tips next Tuesday, but check back for other topics this week!

Billy Epperhart
Billy Epperhart
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