Getting ready to finance your first rental property takes a bit more with regard to paperwork and planning compared to financing a primary residence. Real estate investors can expect an approval process with a few more steps and it might get a bit frustrating without knowing what to expect. There arepreparing for a rental loan some things that can trip up an otherwise smooth application with a bank so a little preparation is best.

 Understand that the mortgage company will approve you as well as the property itself. The property must be in at least what is considered average condition without any structural issues. Real estate that needs work before it can be lived in must be repaired before most conventional mortgage lenders will finance the loan.

Your income needs to be enough to cover your primary housing expenses in addition to the new mortgage for the rental property plus associated costs such as insurance and property taxes. For your first real estate investment, you must be able to afford the two mortgages at once. Only when you’ve had a rental property for at least one year and can show it on Schedule E of your federal income tax forms with a lender allow the rental from the unit to offset the new mortgage.

Credit is important and you can expect most lenders to require a 660 credit score although some will allow for a 640 score. A minimum of 20 percent down payment is required in addition to your closing costs which can add up to another three to four percent of the sales price. These costs can always be negotiated with the seller or operate with a credit from your mortgage company.

Have your most recent bank statements from the account where the down payment and closing costs will be coming from, your two most recent income tax returns, W2 forms and recent pay check stubs. If you’re self-employed, you’ll be asked to show your year to date profit and loss statement.