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Commercial Investment Property
Loan Collateral (cont.)
The
commercial loan
underwriting process places great importance upon a
commercial
appraisal when assessing the collateral for the
commercial
real estate loan.
A commercial appraisal utilizes three variables to derive the
commercial real estate's value, income approach replacement cost,
and sales comparison method.
-
Heavy emphasis is placed
on the income approach valuation method. Other key
factors a commercial lender will review in the appraisal are:
property's age, area market capitalization rate, comparable
properties, vacancy rates, and the general overall condition of
the property.
2. Commercial Investment
Property Cash Flow
The cash flow derived from the gross rents of a property
is one of the most important factors
commercial lenders
use when approving or denying a commercial mortgage loan
request. An underwriter will review the historic income
generated from the property, with a focus on the most recent
90 days.
3. Borrower/Guarantor
Credit
Credit can be defined as the combined personal credit of the
borrowers/guarantors. If a corporation, partnership, Trust, REIT, or
other non-natural person is the borrower, than the credit of the
entity will be considered as well, although to a lesser degree.
Minimum personal credit
requirements for a commercial loan are:
- 620 minimum credit score
- No personal bankruptcy in the
past 7 years
- No open tax liens or judgments
The 3 C's of Commercial
Lending™ are the basis for underwriting a
commercial loan request.
Commercial mortgage loan requests that meet these basic requirements create the foundation for a successful commercial loan
approval.
But keep in mind, this doesn't necessarily
mean that a borrower that meets these requirements is
automatically approved for a
commercial mortgage loan. But rest
assured, not meeting any one of the 3 C's of credit will
surely end in denial of your commercial loan request.
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