Collateral Property Characteristics

All lenders set underwriting standards for the properties that they will accept as collateral for their mortgage loans. Some lenders won't finance properties larger than four units. Some won't finance properties in poor condition or those located in run-down neighborhoods. Many lend

7 For a much more extensive discussion of financing properties, see my book The 106 Mortgage Secrets That All Homebuyers Must Learn—but Lenders Don't Tell (Wiley, 2003).

ers verify that a property is serviced by all utilities (e.g., some lenders avoid properties with septic tanks instead of sewer lines). Lenders may also set standards that apply to paved streets, conformance with zoning and building regulations, and proximity to schools, public transportation, shopping, and job centers.

Before you look at properties and write up an offer to buy, check whether that property meets the criteria of the lender and loan program that you intend to use. Otherwise you may waste time and money (loan application costs, appraisal, and other miscellaneous fees). Often, lenders will not refund these prepaid expenses.

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