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Commercial Real Estate Financing

Commercial Real Estate Financing. … Made Easy. Mortgage Concepts: “A Refresher”. Debt-to-Income Ratio (DTI) – amount of your bills divided by your gross income before taxes. In other words, it is the % of your monthly income that goes to bills. The lower this number, the better.

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Commercial Real Estate Financing

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  1. Commercial Real Estate Financing … Made Easy

  2. Mortgage Concepts:“A Refresher” Debt-to-Income Ratio (DTI) – amount of your bills divided by your gross income before taxes. In other words, it is the % of your monthly income that goes to bills. The lower this number, the better. Loan-to-Value Ratio (LTV) – amount you owe divided by what the house is worth. Subtract % of downpayment from 100% and this is your LTV. Combined LTV Ratio (CLTV) – amount owed on all combined mortgages. Can have a 2nd loan for as much as 20% of the property value with a 1st loan for as much as 75% of the property value. This combination allows you to put down less money for your downpayment.

  3. Commercial Mortgage Concepts Debt Service Coverage Ratio– • Equals debt payments on a piece of real estate divided by net operating income from that piece of real estate. • If you make exactly the amount of income from the property as what is due for the payment, this ratio = 1 • The higher this number, the better; preferably 1 or higher • DSCR of less than one means negative operating income Payment ÷ Income from Property = DSCR

  4. Overview of AmeriNET’s Program • Loan from $100k to $1.5 million • Both owner-occupied and investment properties • Up to 97% LTV on some types of Owner Occupied properties • Up to 95% CLTV on some types of investor properties • Both purchase & rate/term or cash-out-refi • Stated Income/Stated Assets Available • No upper limits on cash out component

  5. Traditional Commercial:Other Lenders • Based solely on cash flow of the property • Takes 3 to 4 months to close loan! • Linear Process • Lower CLTV, no more than 80% • Limited property types – no mobile home parks !

  6. How Are We Different? Other Companies: • Usually require periodic inspection of “books” • Usually have a balloon payment and shorter time-span than home mortgages, i.e. 10 years or less to pay back With AmeriNET Mortgage: • NO inspection of the books with timely payments • Amortized up to 30 years (15 and 20 year terms available)

  7. AmeriNET Commercial Lending:A Residential Approach • We concentrate on personal financial strength, rather than property cash flow alone • Incorporate all income sources, assets, cash flow • Look at DTI and ability to pay, not just DSCR • Non-linear process allows loans to close sooner  Results in financing to more borrowers

  8. Underwriting Philosophy Rate based on combination of 4 factors: • Property type • Term length • Credit • LTV

  9. Types of Commercial Properties We finance the following types of properties: Office Buildings Office condos Mobile home parks RV parks Gas stations Restaurants Retail Warehouses Apartment complexes Automotive Self-Storage Mixed Use Bed & Breakfasts Light Industrial Multi-family 5+ Funeral Homes Daycare Rooming Houses Healthcare Dry Cleaners

  10. Interest Rate Pricing Tiers • Tier 1 Multi-family or Mixed-use properties • Tier 2 Mixed-Use, Office, Retail, Warehouse, Light Industrial, Mobile Home Park, Self-Storage, Bed-and-Breakfasts • Tier 3 Industrial, Automotive, Funeral Home, Rooming House, Flagged Hospitality • Tier 4 Gas Stations, Healthcare, Daycare, RV Park, Unflagged Hospitality, Restaurant, Special-Purpose • The higher the tier, the riskier the investment, thus interest rates reflect this.

  11. Ineligible Property Types We do NOT finance the following: • Traditional churches • Agricultural use • Repairs greater than $50,000 (uninhabitable) • Adult entertainment facilities

  12. Eligible Borrowers • Individuals • Corporations • Partnerships • LPs • Certain Trusts

  13. AmeriNET’s LTV & CLTV Purchases: • Up to 97% standard LTV on OO • Up to 75% LTV with seller 2nd of 20% = 95% CLTV on Tier 1 properties Refinance: • Up to 97% LTV on Owner Occupied Tier II Properties • Up to 90% LTV on Investor Properties

  14. AmeriNET Offers… • 15, 20, & 30-year Fully Amortized Loans • 6-month Adjustable Rate Loans • 2, 3, 5 and 7-Year Fixed Loans • Declining Fixed-Rate Loans (reduces .5% every 5 years for on time payment history) • High loan to value (LTV) • Up to 97% of property value on OO Tier 2 properties • Up to 95% CLTV for Tier 1 properties • Up to 90% LTV for all Tier 2 and 3 properties

  15. Qualifying for a Commercial Loan:Full Doc • Middle credit score of at least 580 * • 2 years of IRS tax returns to prove income • At least 2 months of P & I payments in liquid assets as reserve • Loans from $100k to $1.5 million • May have negative operating income **  Average credit score for most loans 640+ unless strong DSCR *  Provides the opportunity to buy property that may not currently have positive cash flow **

  16. Qualifying for a Commercial Loan:Stated Income/Stated Assets • Loan Request • Fannie Mae 1003 • Tri-merge credit report • Loans from $100k to $1 million

  17. Adjustable Interest Rates • Based on Wall Street Market Prime Index • Initial cap of 2% at reset except 6 mo adjustable • Periodic cap of 1.5% • Life of Loan Cap = Fully Indexed Rate + 6% • All 6-month adjustable rates adjust equally by 1.5% every 6 months

  18. Documentation Needed • Rent Roll • Agreement of Sale • YTD Profit & Loss Statement • Commercial Leases • Property appraisal (usually more complex, time-consuming, and expensive than residential) • Property description & photos

  19. Discount Points 2% up front = .75% rate decrease 1% up front = .375% rate decrease Cannot be combined with lock-outs.

  20. Our Pre-Payment Penalty • Standard is 5% for 5 years • Optional 3-Year 5% with 3-Year Lockout (adds .375% to rate) • Optional 3-Year Lockout (subtracts .25% from rate) • Optional 5-Year Lockout (subtracts .5% from rate) • Optional 7-Year with 7-Year Lockout (subtracts .75% from rate) • Optional 7-Year with 10-Year Lockout (subtracts 1% from rate) Lockout = all interest due for entire lock out period if paid off during the penalty period. This is strongly discouraged unless keeping the property for lengthy period.

  21. Pre-Payment Penalty Details • 5% of the unpaid principal balance if paid off during the penalty period • Declining option of 1% per year until no PPP • After 5 years there is no fee to payoff the loan • For .375% upward rate adjustment, can get 3 year PPP option instead of 5 years

  22. Loan Details • Rates locked for 45 days except 5, 7, and Declining Fixed (can be locked at .125% higher than quoted rate) • Conditional Pre-Approval Letter stipulates the terms of the loan, fees to close, & docs needed • Fully assumable upon approval for $500 fee • Application used is the Residential 1003 • All loans must be personally guaranteed by borrowers, even if a legal entity

  23. Borrower’s Fees • $500 Lender Fee *** (non-negotiable) • If not auto-bill-pay, add $250 (non-negotiable) • Origination fee of 1% (negotiable) • All out of pocket expenses, i.e. title fees, appraisal fees, survey, environmental insurance fees, etc (non-negotiable) $500 Refund If All Documentation Received Within 10 Business Days of Conditional Approval Letter

  24. Review of AmeriNET’s Program • Loans take less time • Terms amortized up to 30 years • More property types accepted • No balloon payments • No periodic inspection of “books” • Credit Scores of 580+ • Up to 97% LTV on some OO properties • Up to 90% LTV on some investor properties Why would you want to take your commercial loan anywhere else?

  25. Kelly Fest Loan Officer 940-239-0507 fast-loan@hotmail.com www.lending-tx.com We Finance Your Real Estate DreamsAt AmeriNET Mortgage! Whatever you can do or dream you can, begin it. Boldness has genius, power, and magic in it. -Goethe

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