Commercial Loan

・Commercial Loan

Commercial Loan
Commercial loan is for the loan of a 5+ units apartment, office, commercial property, retail store, mixed-use property and the most important element is how the property works financially (Rent Income-cost of maintenance etc). The net profit (Gross annual income {Rent income + vending machine + Coin Laundry etc} vacancy (normally 5%) + operating cost {Property tax, insurance, maintenance fee, repairs}) should be more than the monthly payment by 20% - See DCR for detail.

・Outline

Property type Apartment Mixed-Use Office, Commercial, Retail shop
Purpose Purchase or Refinance For 5+ units apartment Purchase or Refinance for Mixed-Use Purchase or Refinance for Office, Commercial, Retail
Loan amount $200,000-$15,000,000 $200,000-$3,000,000 $200,000-$15,000,000
Interest rate Fixed (10yr, 15yr, 20yr, 30yr) Fixed for certain period + Adjustable (3yr, 5yr, 7yr Fixed) Adjustable
Loan cost Depends on loan programs and credit history. Ask for details
Documents
■Loan application Applicant’s asset ■ liabilities
■Financial statement Profit ■ Loss statements (last 2years) Balance sheet
■Others Purchase agreement, Lease agreement, Insurance, Appraisal report, Credit report, Tax return, Pay stub, Article of Incorporation etc.
*Necessary documents may differ depending on program. Ask for details.
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・Commercial Loan process

  1. Consult with loan officer
    Present with loan amount, program, rate, fee based on income, assets, and credit scores
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  2. Submit necessary documents and apply for the loan
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  3. Opening escrow
    If purchased, submit purchase agreement and initial deposit to escrow
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  4. Submit loan packages (loan application and necessary documents) to the lender
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  5. Lender’s approval & Letter of Intent
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  6. Order appraisal report
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  7. Lock in rate
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  8. Sign all loan documents
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  9. Funding
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  10. Recording deeds
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・Necessary Documents

Refinance Purchase
  • Rent Roll
    Type of each units, Name of tenant, Rent amount, Leasing Term
  • Profit & Loss Statement
    Last 2 yrs operating statement, current expenses (Property tax, Insurance, Utilities, Repairs and Maintenance fee) and current income (Rent and other income)
  • Copy of Lease agreement
    *If applicant is a corporation, need an Article of Incorporation, Bylaws, and Corporate tax return for the last 2yrs
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・Type of Loan and Program

Loan Type
Fixed and mainly adjustable
Fixed 2, 3,4,7,10,15 yr fixed and then adjustable
Adjustable 1 month, 6 months, 1 year
Qualified by individual's income, asset, credit and income from the property

Program
Qualified by individual's income, asset, credit and income from the property
Full DOC
Stated DOC
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・Non-Recourse

Non-Recourse Non-Recourse means that liability does not recourse to Individual credit. For example, even if default or law suits arise, applicants, him/herself will not be responsible for payment. By requesting Non-recourse when submitting the loan, it will be attached to the Note. Not all commercial loans apply it.

・DCR

DCR: Debt Coverage Ratio, here is how it works,
Debt Coverage Ratio
In general, to be qualified, DCR should be more than 1.2
→DCR Worksheet
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