Tips to Qualify for an Apartment Building Loan

Investing in an apartment building is a great way to expand your assets while making some extra money. Financing an apartment building is slightly different that financing a single family home, so it is important to make sure that you go through the process correctly. Make sure to consider these differences when you are looking into financing apartment buildings.

  • An apartment building loan can be assumed unlimited amounts of time during the duration of its term. Buyers can assume a loan from the seller if they have good credit.
  • Your personal assets will not be at risk if you default on an apartment building loan since there is very limited lender recourse.
  • The fees for an apartment building loan can be very high, with an application fee typically starting at $4,500.
  • Corporations, trusts, partnerships, and LLCs can take out apartment building loans.
  • In order to qualify for an apartment building loan for a building that has more than four units, you must show a history of successfully owing a multifamily property, such as a duplex, which can be purchased using a typical residential mortgage.
  • You must have a net worth that is “reasonable” in comparison with the loan amount. This typically means that you must have documentation of liquid assets that are at least six months of interest, principle, taxes and insurance payments on the purchased property.
  • Prepayment costs on apartment building loans are very high, up to 20 percent of the complete loan balance. You do have the option to substitute, or defease, a similar property as collateral to the loan. Keep in mind there are also charges that are associated with defeasing a property.

For all of your lending needs, whether you are looking to invest in an apartment building or a single family home, contact the lending experts at Avis Lending. We can help to ensure that you invest in the best property that will fit into your lifestyle.

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