Getting denied an investment mortgage loan can be a crushing blow to any real estate investor, especially if it means you are going to lose the investment opportunity. When you are denied a business loan for your investment property, try not to be too discouraged by this roadblock as there are steps you can take to learn why you were denied.
Here are 5 tips for finding out why you were denied an investment loan so you can better prepare yourself for the next application and do not lose out on another investment opportunity.
- Speak with the lender about why you were denied a real estate investment loan.
Many lenders will tell you what caused your investment mortgage loan to be denied so that you can work on resolving the issue(s). It could be that your debt-to-income ratio was too high, the investment property was not eligible for a loan, you have too many existing loans, not enough assets, or you have poor business credit. It could also be a combination of many of these factors. There are many reasons why lenders will deny you, especially investment loans which are considered to be riskier. Expect lenders to take an even closer look when applying for a real estate investment loan.
- Review all documentation.
Investment mortgage loans require a strong paper trail. If there are errors on any of the financial statements or you provide the wrong documents to the bank, it can lead to a denial. If it appears all your documents are correct, it may be that your financials or business credit scores do not meet this lender’s requirements. If your business credit score is the reason you were denied, work with a business credit repair specialist to improve your business credit score.
- Prepare before applying again.
If you keep applying for an investment mortgage loan while repeatedly getting denied, it will cause excessive inquiries and can hurt your credit. Instead, first research different lenders and their requirements. If there is any indication that you were denied the mortgage loan because of business credit, find a business credit repair expert to analyze, improve, or build your business credit profile. In the interim, try to find a lender who will approve you with a personal guarantee and report to the business credit bureaus.
- Pull a copy of your business and personal credit reports.
Purchase a copy of both your business and personal credit reports. It is wise to review these reports many times during the year, especially if you are frequently applying for new investment loans. Lenders have higher credit expectations for investment borrowers, so it is important to monitor your business credit to make sure your credit is squeaky clean. The best business credit reports to order and review is from the 3 major business credit bureaus: Experian, Dun & Bradstreet, and Equifax.
- Speak with a business credit repair professional.
There is a team of business and personal credit experts at North Shore Advisory who have helped hundreds of businesses and real estate investors position themselves to access funding. We can help guide you in the right direction, providing insight into your business credit reports so you can better managing your credit.