Mortgage Loans Guide

Real Estate Commercial Loans

What is a Real Estate Commercial Loan?

A real estate commercial loan is a form of mortgage loan used to buy, renovate, or refinance commercial buildings or land zoned for commercial or mixed use.

How Do I Get a Commercial Loan For Real Estate?

You may want to be pre-qualified by a commercial mortgage broker who can find you the best terms and rates for your commercial real estate loan. Conduct a search for “real estate commercial loans”, “real estate commercial loan”, “commercial loan real estate” and you are sure to find and endless number of possibilities to choose from.

What Can I Use a Real Estate Commercial Loans For?

Real estate commercial loans can be used for purchasing land and making necessary improvements includuing grading, utilities, parking lots, and landscaping. These loans can also be used for the purchase, construction, or renovation of commercial buildings or land.

What Terms and Interest Rates and Fees Can I Expect From a Real Estate Commercial Loan?

Interest rates on commercial real estate loans are based on an increment above the current market rate for five-year and 10-year U.S. Treasury bonds. Maturities can be 10, 15, 20, or 30 years. Many commercial real estate loans require a bollon payment after 10 years. You may want to consider refinancing at that time or get a loan that does not require a balloon payment. Fees on commercial mortgage loans usually total approximately three 3% of the borrowed amount.

What Are the Qualifications For a Commercial Loan For Real Estate?

To qualify for a commercial real estate loan, you must have enough liquid assets to pay a down payment and closing costs. Down payments on a commercial real estate purchase can go as low as 3%. There is no down payment requirement for a commercial loan refinance.

Are There Loan Limits For a Real Estate Commercial Loan?

Loan limits on commercial real estate loans differ from lender to lender. They start as low as $50,000 and can go as high as $50-$100 million.

Where Can I Find a Real Estate Commercial Lender?

It’s relatively easy to find commercial lenders and commercial mortgage brokers online.       A good place to start looking for a commercial real estate lender is online. Do a search for: “real estate commercial lending”, “real estate commercial lenders”, “real estate commercial bank”

Are There Any Government Programs to Help Me Get a Real Estate Commercial Loan?

The U.S. Small Business Administration (SBA) works with lenders and non-profit corporations to provide commercial loans to small businesses through the CDC/504 Program.The CDC/504 Program provides small businesses with long-term, fixed-rate commercial loans for major assets, such as land and buildings. A Certified Development Company (CDC) is a nonprofit corporation set up to assist in the economic development of a particular communities. Each CDC covers a specific geographic area.



By: E. T. Hobbs

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Content

Global income in terms of commercial mortgage underwriting is about trying to get at the whole picture of the borrowers financial position.  Underwriters want to know what the borrower’s total NET income is.  This is calculated by looking at all income and all expenses on all businesses, real estate, any other investments and personal expenses the borrower has.   The primary question the underwriters are trying to answer “is the borrower cash flowing?” 

It is common for a borrower to have a several entities that are showing a profit and a few that are losing money.  It’s also common to see that the borrowers personal expenses actual exceed what they make through all of their sources of income.   If the borrower is losing money overall  and he will have a difficult time getting a loan (obviously). 

Here’s a quick example on how to calculate global income.  Scenario -  commercial refinance, owner occupied, with a loan amount of $1,000,000.  Rate on the proposed loan is 6.5% on a 25 year amortization schedule.  To keep is simple, the borrower only has one business and personal income & expenses with no other entities to take into account.  After reviewing the business tax returns and adding back non cash expenses such as depreciation, interest, amortization, etc you see you have say $150,000 in net business income that can be used to service the proposed loan. 

On the personal side, the borrower pays himself $100,000 a year from his business and it is reported as W-2 income.  After pulling the borrower’s credit report you see that his total monthly personal  bills are $4,500.  Most banks will simply double the personal expenses that show up on the credit report to cover all of the borrower’s personal expenses that don’t show up..  So that’s $4,500 x 2 x 12 months equals $108,000.  According to underwriting guidelines he’s $8,000 ($108,000 - $100,000) short per year in personal income and this amount is subtracted out of the $150,000 of net business income. 

So the global net income is $142,000.  This is a simple example and does not go into all the items that can be added back or that are reported twice, but hopefully should give you an idea on how to calculate Global Income.   



By: jeff rauth

About the Author:

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We get a lot of questions regarding the commercial loan business.  Many are from our peers that want our opinions on the commercial loan business. 

Warren Buffet was on the radio this morning.  He stated “when the markets greedy, be fearful.  When the markets fearful, you be greedy.”  I think we can all apply that perspective on our positions in the commercial loan business.  In a few years, the credit crisis will have settled.  The commercial loan business will be different, but it will still be viable.  There will be more government regulation for sure and probably more intense review of the credit rating agencies out there, like moody’s etc. 

Perhaps there will be a new type of loan structure replacing the current CMBS platform, but the players that pulled out will be kicking themselves as they see their competition making serous money and they will still be learning the “ropes” of their new chosen field.  The survivors will make big headway in market share.We believe that the problems can and will be fix.  This is just another recession in a long list of them.  We go through this every 10 to 15 years.  Now is the time to adapt and refine your skills - not the time to pull out.  We tend to think a lot about what is still funding. 

What lenders and banks are still looking at deals?  Never mind what the borrower wants or thinks he should get.  It’s more an attitude of take it or leave it. 

The commercial loan business is still moving forward, with a limp for sure, but it’s still moving forward.  For example we are still closing loans.  Both owner occ and investment.    

This is the time people build substantial wealth as they pick up bargain opportunities or take chunks of market share that just wouldn’t be possible during normal times.   



By: jeff rauth

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Becoming a Loan Officer: A Rewarding Career

 

Want to make people’s dreams of homeownership a reality? A loan officer can do just that. Of course becoming a loan officer also means that you must be aware that you will be required to have the last word in making people’s dreams of homeownership a reality. This is important because you will be the one that is facing the potential borrower when you need to deny a loan application. The great thing is, though, that you will also have the opportunity to make hundreds happy when you approve their application.

 

Before you set up your desk at a bank or mortgage lending office, though, you first need to determine whether or not you are really sure that this is what you want as a career. This is a hard job that requires certification and licensing in some states; however if you are sure and absolutely certain that it is what you want to do, then you need to think about what your current qualifications are.

 

Educational Background

Schooling is not a fundamental requisite, however, it is suggested. From a bachelor’s degree or higher in any of the major economical areas (including economics, finance, accounting, etc) to a generalized degree in psychology or business, your education will serve as the foundation for your career.

 

Even if you don’t have an education, though, your personal experience may be useful if you want to be a loan officer. If you’ve worked with loan companies in the past, be they banking institutions or private companies, you may be able to get the job without a degree.

 

If you’re just getting started in the business world, and you’ve yet to gain any personal experience or education, you still have several options. First, try to get an entry-level position with a lending company. Second, consider physical or virtual education options offered by universities and continuing education institutions. From programs offered by the National Association of Mortgage Brokers to those sponsored by private institutions, you’ll find many loan officer training courses both in your area and online.

 

Considering Your Specialty

However, there are additional things that need to be considered before you make your final career decisions. First, it is essential that you think about the three primary areas loan officers work in: Consumer loans, Commercial loans and Mortgage loans.

 

Even though any loan officer can work in any of these areas and even alternate between them, it is fairly common to specialize in one of them so you can develop and fulfill all the skills necessary to becoming an excellent loan officer.

 

Keep in mind that you will be guiding the borrower step by step through the process of applying. You’ll help potential candidates navigate tricky credit backgrounds and sketchy job histories. As a result, understanding your loan market well is absolutely essential.

 

The Necessary Personal Skills

Before you even consider taking a job in this market, you must analyze your personal skills in some depth. Are you a good communicator? Can you deal with difficult clients on a regular basis? Can you provide ongoing support to a variety of clients? Will you be able to convey the necessary steps of the loan application process to all kinds of potential borrowers?

 

One large part of any loan officer’s job is sales work. Getting referrals, doing the leg work to make sure a potential borrower moves forward with your bank, and convincing people that you’re the right lender for them is much of your job. If you’re uncomfortable with sales work, you may want to consider another aspect of lending.

 

The Right Training

Even if you do have the benefit of a college degree and some personal experience, most banks and companies will want you to further your training. You’ll need both some technical training about aspects of a loan officer’s job as well as computer banking courses to understand the interfaces that most companies use.

 

There are several training course available that may make you more attractive to potential employers. The Bank Administration Institute has a Loan Review Certificate program that is great for starting loan officers. If you plan to review and approve loans, this course is geared toward you. It can help you understand your role and find problems much earlier, and this can make each of your bank’s investments safer. The Mortgage Bankers Association offers a Certified Mortgage Banker set of courses to help set you apart from others in your speciality. If you have three years of experience and complete their set of courses, you may be able to receive a certificate of completion as well as CMB status that will help make you more marketable.

 

Keep in mind that some states have licensure tests that are required before you can attain loan officer status with any company. In most cases, you’ll need to have the tests completed before you apply with any bank or company. Check with your state board of lending for specific requirements.

 

Your Marketability

Once you have achieved loan officer status, you’re not only employable by a variety of banks and companies, you can also work out of your home to match potential lenders with those who need loans. While it’s as difficult as setting up any home business, it can certainly be a rewarding aspect of becoming a loan officer.

 

Over the course of the next ten years, the demand for loan officers is only expected to grow. With an average salary of nearly fifty thousand dollars each year, becoming a loan officer is a great career choice. Once you’ve decided that becoming a loan officer truly is a step in the right career direction for you, talk with industry professionals to take a step in the right direction.



By: melinamenny

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