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If a property has
been owned for less than two years, we must use the
purchase price plus the cost of any improvements made
for determination of the property’s value. |
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A commercial loan involves real
estate, where as a business loan involves non-real estate
collateral. Always clarify. |
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One potential source for a
down payment on a commercial property is through a cash-out
refinance on a residential property. |
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Stated Income
Loans
This loan type is used when the property’s Net Operating
Income cannot be proven through tax returns and the
income needs to be “stated” by the borrower. The word
“property” is emphasized because it is the property’s
income that is the focus of a commercial loan. If a
property is an income type property such as an office
building or a business property such as a restaurant
than the tax returns should reflect the true income
made through the property. In cases where the borrower
wishes to purchase a property, the seller might be unable
or unwilling to show appropriately profitable tax returns,
thus the stated income loan can solve the problem. In
other cases where a borrower wishes to refinance his
existing mortgage and his previous two years tax returns
do not reflect a strong enough Net Operating Income,
the stated income loan can be the answer as well.
The key to our stated income loan is that we will allow
the borrower to “state” their income for loan purposes.
Of course the “stated” income must make sense. We ideally
would still like to see the tax returns in case we can
make the loan fit our full income verification standards.
However, if the tax returns will not work, then we will
ignore the tax returns and typically not require any
additional proof of income. By allowing the borrower
to “state” the property income, we in effect are trusting
the borrower’s ability to make the monthly mortgage
payments. Due to the added risk of the “stated” income,
the interest rates are higher when compared to a standard
Grade “A” loan. Typically the Loan-to-Values can range
from 55% to 80%. We can handle just about any type of
property under this loan except raw land and gas stations.
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Mediocre Credit
Loans
Most Grade “A” loans require at least a middle credit
score of 620. Thus, when a borrower has a credit
score between approximately 570 and 620, they typically
will not fit into the Grade “A” loan category. Our
numerous Grade B-C loan programs can than make the
difference between a bank loan turndown and a successful
closing. |
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Private Mortgage
Simultaneous Closes
Commercial simultaneous closings may be the answer to
many of your and our challenging loan scenarios. Simultaneous
closings are part of our Grade “B-C” division. A simultaneous
closing is a two-part transaction. The first part of
the transaction involves the seller of the property
taking back an owner financed private mortgage from
the buyer of the property. The second part of the transaction
involves Financial Resources buying the mortgage from
the seller.
The mortgage is purchased from the seller of the property
at a discount. The process is similar to a commercial
loan in some aspects and different in others. For example,
unlike a commercial loan, we do not care what the terms
are on the owner financed mortgage. The seller and buyer
could agree to a 3% interest rate and we would still
be able to buy the mortgage. The drawback to the seller
would be that we would not pay as much for a mortgage
with a 3% interest rate as we would for a mortgage with
a 10% interest rate.
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