It's a hard fact but although Lethbridge lenders may be friendly, they are not your friend. This doesn't make them bad; it just means that they - like you - are engaging in business, not social relations. Though they will often decide in your favor on a borderline case if you have a long-term working relationship, this is not charity, but an intelligent business judgment. They have good reason to believe you will be able to repay the loan at a profit to them.

That last sentence is key to understanding — and avoids much frustration with — Lethbridge lenders. They need assurance that the loan will be repaid and they need some reasonable expectation they will make a profit. A Lethbridge lender will try to fulfill those two criteria the same way anyone would — by looking at past history and current facts.

Past history means: Credit history, including number and size of loans taken out, repayment history and so forth. FICO- Fair Isaac Corporation- scores and other hard data are available in abundance and will be looked at.

It also includes income history — how much profit have you made on other investments and over how long a period? They'll examine income statements and at least three years of tax returns. They'll want a full accounting of outstanding debt and any legal judgments gained or issues in progress.

Overall, this is summed up in one word — experience. Have you previously shown you can and will repay a loan, which requires not only good character but good business judgment? Lethbridge real estate is a tough market, there's a lot of competition because there's a lot of potential for making money. The Lethbridge lender will want to know you can make some, so they will too.

Current facts get examined with equal care. The Lethbridge lender will examine the appraised value of a property on which they're considering loaning money. Banks as a rule do not lend based on collateral, they are looking for cash flow and positive income. They'll usually finance no more than 75% of the appraised value of the property.

Most lenders will put a limit of 50% LTV (Loan-to-Value) on undeveloped land, for example. If the property contains commercial structures, they'll want to know what income can be expected from those businesses — whether it's in the form of rent from a multi-dwelling apartment complex or lease income from small business owners.

And, of course, profit is income retained AFTER expenses, so they'll need to know how much it costs to maintain the land and commercial structures. Insurance, repairs, taxes and a host of other costs come along with any property ownership. The Lethbridge lender will want to know you can pay these AND pay their interest charges.

Most Lethbridge lenders will strive for shorter repayment periods, 20-year fixed is on the long side for many investment loans, and often a balloon payment after five or ten years is required. Longer terms benefit you because you can avoid paying for new appraisals, origination fees and other financing costs.

If your Lethbridge lender seeks a shorter period, you should try to arrange re-pricing at the end of five years, rather than having to come up with a large amount of cash. Something along the lines of "prevailing prime rate plus a 1% premium" is often an acceptable alternative.

Lethbridge lenders may not be your friend, but neither do they have to be an enemy — they can be a kind of partner. Keep in mind, everything is negotiable.

There is a lot of property for sale in Lethbridge and having a real estate professional on your team can help you to navigate the difficult process of buying or selling a home in Lethbridge. Call me at 403.795.7777 or email me at info@lethbridgehomeshop.ca to discuss Lethbridge real estate or Lethbridge land for sale and I will be more than happy to answer all your questions. Or, if you would like instant access to information about buying, selling, or building a home in Lethbridge, including Lethbridge real estate values and more, please visit the most complete website dedicated to everything Lethbridge real estate at http://www.courtneyatkinson.ca or contact us using the form below.