| Q |
What are comps? |
A |
Each lender requires the appraisal to include 3 or 4 comparable pieces of property within a few miles of similar age, structure, size, and income in order to determine if the selling price is appropriate for the particular area. |
| Q |
What does index mean? |
A |
A statistical indicator published by financial institutions to reflect changes in the market interest rates - the most prevalent being the WSJ (Wall Street Journal) Prime, and LIBOR, but COFI and MTA are also used |
| Q |
What is margin? |
A |
The amount that is added to the index rate to determine the total interest rate. |
| Q |
What is the Debt Coverage Ratio? |
A |
Net Operating Income divided by Annual Debt Service. Most lenders want a minimum DCR of 1.2 |
| Q |
What is Annual Debt Service? |
A |
Monthly principal and interest times 12 months, taxes and insurance not included |
| Q |
What is an ARM loan? |
A |
Adjustable Rate Mortgage - usually offers lower initial interest rates than a fixed rate loan. ARMs have defined adjustment periods that determine how often the interest rate changes, and the rates are based on an index that reflects up or down fluctuations in rates |
| Q |
Can you do construction loans? |
A |
Yes, we can do construction to permanent |
| Q |
Do you handle SBA loans? |
A |
Yes - an excellent source for small businesses. |
| Q |
Can I get a 100% LTV commercial loan? |
A |
No - depending on the borrower’s financial's, the type property, and loan, the range would be 50% to 90% |
| Q |
What basic information would be needed to start the pre- approval process going? |
A |
First of all, call, fax, or email us a brief explanation of your situation, the type property, location and address, price, percentage down for purchase, refinance, loan to value. Next I will need the standard 1003 application filled out, 2 years W2s and/or Schedule Cs for all borrowers with 20% or more interest.
On the property side, last 2 years tax returns, and/or P&L's,
Rent rolls when applicable, with operating and maintenance expenses. Gas stations have their own set of required data. |
| Q |
What up front fees are required? |
A |
Depending on the lender, the type property, and size of the loan, from $0 to a few thousand dollars. The lenders who require up front funds may have slightly lower interest rates and include the appraisal, process fee, administrative costs. We feel that due to the amount of work that is involved by us and the lender on complex loans, front fees show the sincerity of the borrower. |
| Q |
What fees are usually paid at closing? |
A |
Usually origination fee, title work which is quoted by the local title company, tax and insurance escrows, and may run $2500 and up. Insurance is always paid 12 months advance. Usually 3 months principal and interest must be shown in a liquid account. Closing costs are really unique to each project. |
| Q |
What about the appraisal? |
A |
The lender will order the appraisal once the loan is approved and we receive the borrowers check which could be from $1600 or more depending on the size of the project and the lender. Unlike residential, commercial lenders order appraisals from their list of approved appraisers in order to get an impartial appraisal. |
| Q |
Can residential appraisers do commercial appraisals? |
A |
No - because 2 different types or training and licenses are required. There is a lot more work involved in doing a commercial appraisal. |
| Q |
What types of standard valuations are used? |
A |
The 3 standard methods of valuations that are used and are shown as separate sections in the appraisals are - Sales Comparison - Income Approach - Cost Approach. Depending on the lender and type property, 2 or all 3 may be requested by the lender. |
| Q |
What are your interest rates? |
A |
We quote interest rates on a per job basis. Money is a commodity and rates may vary on a daily basis |
| Q |
What about terms? |
A |
Depending on the lender and the deal, we can go out to 25 and 30 years |
| Q |
How long does the total process take? |
A |
From beginning with application to end - 30 to 60 days |
| Q |
Once the final approval is received how long does it take to close? |
A |
14-21 days |
| Q |
Does business experience count in getting a commercial mortgage? |
A |
To a certain degree it does, especially in gas stations. However this is not 100% since good credit scores and a substantial down payment goes a long way with lenders. If the borrower is not experienced in a particular field such as multi - family units or gas stations, related experience is of value. Buying a property with an in place experienced staff is definitely a seller. |
| Q |
Does having a contractors license a factor in purchasing a piece of commercial property? |
A |
Yes but is not a necessity. A contractor can propose reduced maintenance costs and the ability to easily add features to the property |
| Q |
For apartments, what is the minimum amount of units that can be financed? |
A |
Five |
| Q |
What is the highest Cash Out Refinance LTV that you can Offer? |
A |
Depending on the type property, the financial's of the property and owner, and the lender, we can go up to 90% of the appraised value. The most common range is 65% to 85%. |
| Q |
What is a lock out period? |
A |
The period of time, usually 3-7 years, that the borrower can not refinance. Depending on the lender and time period, a borrower can sometimes save .25% to .5% on the rate |
| Q |
Why prepayment penalties? |
A |
Since lenders are in business to make money like all businesses, if borrowers were able to flip properties, the lenders could not stay in business. |
| Q |
What other types of lenders are you associated with? |
A |
We have lenders who specialize in every type of property that is shown on our home page which gives us a tremendous amount of knowledge and expertise to offer our customers. |
| Q |
What are stated income loans? |
A |
This is a solution for borrowers who want a quick and easy loan requiring no tax returns, or income verification and needs 30 day closing. Interest rates are slightly higher than full doc loans, but are not as high as hard money loans |
| Q |
What are Hard Money Loans? |
A |
These are quick closing loans that usually bridge financial gaps or provide funding solutions for properties and situations "outside the box" of conventional lenders. |
