One of the things I get asked often as a loan officer is exactly what it is that a borrower needs to do in order to be prepared to apply for a traditional mortgage loan when buying an investment property — financing the dream of passive income. The simple answer is: a lot. I’ve been in this business a little over ten years, and I’ve seen credit offered by banks literally come full circle.

Back in the “heyday” of mortgage lending (2002 – 2007), loans were being slung left and right to anyone and everyone. Remember 100% financing? It still exists, but it’s much harder to get. Anybody with a pulse could get a mortgage loan and for whatever reason. And it didn’t really matter whom you got the loan from: licensed or unlicensed, there was no industry standard regarding how you could be a loan officer. Well, obviously that all changed with the financial credit crisis in 2008.

The effects are still being felt today regarding the regulatory changes faced by loan originators and the impact that this has had on your average borrower, not to mention the non-owner occupied investment property buyer. More specifically, as it relates to this audience, the investor looking to finance his/her properties via traditional mortgage financing.

Related: Confessions of an Ex-Banker: How to Get Your Next Loan Approved, Guaranteed.

Filling out a loan application can get confusing even for the experienced loan officer. My purpose for giving you this massive list of loan application interview questions is not to deter you in your pursuit for traditional financing for an investment property. Rather, I want you to be prepared before you go and talk to your loan originator so you know what to expect in terms of what questions you need to answer. There are no secrets here. This is all standard information.

As you go through the list below, keep the end goal in mind — buying a property with other people’s money (in this case, the bank’s money). You’re leveraging your hard earned cash (err…maybe not hard earned) to produce an income-generating asset that you could own for a really long time. And you could even get an exponential return on that money if you play your cards right. This is well worth the effort to spend a small amount of time answering questions and producing documents with the end goal in mind.

The Loan Application

(Fannie Mae Form 1003 is called “ten-o-three” or the Uniform Residential Loan Application)

Here is a detailed list of questions that you’ll need to answer when filling out the loan application for an investment property (I’ve added some anecdotal information for some of the questions). Just remember, as a rule of thumb, that whatever is stated on the loan application usually has to be documented.

Type of Mortgage and Terms of the Loan
Loan Type (Conventional, FHA, VA, USDA/Rural Housing, Other): Most, if not all, investment property loans are conventional or jumbo, which falls into the “other” category.
Lien Position (First, Second, Other): Most loans on investment property are first liens. There are 2nds, but they’re much harder to find these days.
Amortization Type (Fixed Rate, ARM, Other): Most people prefer fixed loans, but ARMs are an excellent tool to increase cash flows because of lower interest rates on investment property.
Purchase Price: The contract price. Not applicable for refinance transactions.
Loan Amount: How much money you are borrowing after your down payment?
Interest Rate: This is the actual note rate, not the annual percentage rate which varies based on closing costs.
Loan Term (Number of months): For example, a 30-year fixed loan would have a loan term of 360 months.
Property Information and Purpose of the Loan
Subject Property Address (Street, City, State, Zip, Year Built): The address of the property that is being financed.
Purpose of the Loan (Purchase, Cash-Out Refinance, Rate/Term Refinance, Construction): Purchase or rate/term refinance are the most common. Cash-out refinances on investment properties are harder, but not impossible.
Legal Description of Subject Property: This description comes from the preliminary title report, which is usually already pulled from a title company/closing attorney for a purchase transaction. For a refinance, the loan officer will get this from the escrow officer or closing attorney. This is not something you need to know as a borrower.
Manner in Which Title Will be Held: There are many ways to hold title, and only you can decide that. Check with an escrow officer or closing attorney to figure out which is best for you as an investor.
Source of Funds (Bridge Loan, Cash on Hand, Checking/Savings, Deposit on Purchase Contract, Equity, Gift, etc.): There are numerous ways to come up with the money to put down on the property, but many times they require a paper trail as to where you got the money. The most common is either cash on hand or checking/savings for investment property.
Borrower Information
Borrower’s Full Name, Co-Borrower’s Full Name: Use your full name however you like to do your signature. For example, I don’t usually put my middle name, just my middle initial. All documents that require a signature should match this.
Social Security Number: For identification purposes. Used in pulling your credit report.
Birthdate: For identification purposes. Used in pulling your credit report.
Home Phone: Contact information. Some borrowers don’t even have a home phone anymore; in which case, they use their cell phone number.
Years In School: I’ve never understood why they ask this. Maybe the government has some secret information on you?
Current Address (Street, City, State, Zip): Contact information about where you currently live.
Former Address: Must provide if you’ve lived at your current address less than two years. In other words, you’ll need a two year minimum history of residence regardless if you rent or own.
How Long You’ve Lived at Your Current Address: Indicate how long you’ve lived at your current address.
Marital Status (Married, Single, Divorced, Widowed, Separated): The government wants to know your marital status.
Dependents (and Their Ages): The government also wants to know how many children you have.
Employment Information
Employer (Name, …read more