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What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures, Updated Edition, 2nd Edition by Frank Gallinelli

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CHAPTER 37Calculation 31: Maximum Loan Amount

What It Means

You know that when you apply for a home mortgage, you typically need to pass muster according to certain underwriting ratios. Most lenders require that your housing costs and your total debt payments not exceed specific percentages of your income.

With commercial mortgages, your personal credit is not irrelevant (being a deadbeat is seldom an advantage when it comes to borrowing money), but you will find that the lender is particularly interested in the ability of the property to produce income.

Even if you are a great credit risk, the amount of financing you are likely to obtain against a piece of income property will be limited by the interaction of three factors:

1.  Net operating ...

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