Top Questions for an Underwriter

I’m an underwriter for a bank that specializes in real estate investment properties.

What are the top questions you have for an actual underwriter?

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Thanks for the opportunity. Here are a few:

  1. Conventional investor loans are 80% of purchase price (loan-to-cost (TLC)). Most banks will not approve an 80% LTV (loan-to-VALUE) but will only approve 80% LTC.

Purchase price: $100,000
Fair market value: $120,000

Banks will loan 80% LTC: $80,000. But banks will NOT loan 80% of LTV: $96,000 ($120K x .8) - even if there is proven rent and positive cash-flow. Why not do these loans if the underlying numbers would support?

  1. Banks normally do not allow 2nd mortgages even though the numbers may allow for it.

Example: Purchase of a house for $60,000. Payments on 2 loans (80% 1st and 20% 2nd) would be $450-$550. The rent is $1,300. LOTS of cash flow to cover the bank’s risk, but no 2nds are allowed. WHY NOT? This is an actual deal I’m looking at and the bank COULD make money on this.

  1. Banks won’t allow borrowers to take possession by form of an LLC. This is practically a necessity – as an investor has to be just about crazy to own a rental in your personal name these days. Why not allow LLC’s?

Would appreciate your insight!