InterBay Funding Just One Source Also Full-Doc & Hard Money Loans   Our real estate department utilizes the appraisal report to assist in the determination of the property value. However, InterBay Real Estate Analysts arrive at a valuation based on their review of the appraisal report and it is the InterBay valuation that is utilized to compute the LTV. All appraisals are subject to review by InterBay's real estate department. All appraisals are desk reviewed, others are rejected as inadequate. In cases where there are questions concerning the appraisal report, the InterBay real estate department will contact the appraiser for clarification. In many cases, appraisers are able to supply additional information to support their opinion of value, however, it is important to note that this process always delays the review process. InterBay reserves the right to determine that a submitted appraisal is unacceptable. It is important that appraisers be engaged by InterBay so that they are aware of InterBay's appraisal requirements before the appraisal is started in order to avoid any misunderstandings. Also, appraisers need to make themselves available to the InterBay staff appraisers in order to avoid delays in the appraisal review process. Complete details about our process and requirements will be made available to the appraiser via our Engagement Letter and our Valuation Guidelines. Commercial Appraisal Review Process Appraisal Formats and Contents Appropriate formats and the required contents of each appraisal will be provided to the appraiser via the Engagement Letter and Valuation Guidelines. Some "form" reports are acceptable for specific property types, but Complete Summary narrative reports are more appropriate for most property types. Any questions regarding the format or content of a report will be discussed with InterBay's real estate department before the appraisal process begins. An executed Engagement Letter must be included with each appraisal, so the appraiser will be aware of our requirements before the assignment is started. Supporting Documents The appraisal should be accompanied by appropriate documentation (i.e. agreement of sale, rent roll, commercial lease, etc.) as described on the Engagement Letter and our Valuation Guidelines. The lack of relevant documents will delay the review process. Effective Dates The effective date of an appraisal must be within six (6) months of the date of closing. Selection of an Appraiser Effective June 1, 2004: InterBay utilizes Mercury Real Estate Services, LLC to select an appraiser for all new assignments from a database of existing appraisers, or by researching an appropriate appraiser. For information on the Engagement Process, a broker should rely on the InterBay Loan Officer or Real Estate Analyst; the Loan Officer has constant access to the Real Estate department. Loan Processing Because InterBay programs are stated income / stated asset, InterBay can close a loan as quickly as an appraisal and title report can be submitted and accepted by InterBay. Generally, InterBay closes loans within 4 weeks of submission. The process depends on the status of the appraisal and title report. The initial submission for pre-approval requires only a completed 1003, broker’s tri-merged credit report with credit scores and the InterBay loan request form. Pre-approvals are generally issued within 48 hours of receipt. The pre-approval is a conditional commitment to fund a loan based solely on the information supplied by the broker and the requirements stipulated in the pre-approval. InterBay utilizes the credit report submitted by the broker to evaluate the applicant’s credit and grade the loan as to price and permitted LTV ratio. InterBay does not run its credit report until the property appraisal has been reviewed and accepted by InterBay. Therefore, any changes in the borrower’s credit standing as reflected by the credit score may result in a change in price and LTV, as well as, denial of the loan. Additional supporting documentation or stipulations contained in the pre-approval must be submitted for underwriting review and acceptance prior to closing. Requests to waive pre-approval stipulations can only be authorized by an underwriter issuing a revised pre-approval form. No oral waiver of stipulations is allowed by any InterBay employee and will not be honored by InterBay under any circumstances. Brokers and applicants need to be aware that InterBay staff appraisers review all appraisals. We recommend that you reference the section on our Appraisal Process for more information. Mortgagor title commitments should be ordered once the appraisal has been approved. InterBay requires that all exceptions contained in Schedule BII of the title report be removed as of the time of closing. No loan can close with exceptions on section BII of the title report without the approval of InterBay’s legal department. Underwriting Process Pre-approval Underwriting Generally, a pre-approval contains all of the conditions necessary to have a loan approved for closing. A completed 1003, tri-merged credit report, and the completed Loan Request Form are required in order to be submitted to underwriting for pre-approval. Income – All InterBay programs are stated income, but the income must be stated by the applicant and included in section VZ of the 1003. No application can be considered complete with this section left blank. No InterBay employee is allowed to complete this section of the 1003 for any reason. InterBay does not verify an applicant’s income and relies solely on the applicant’s statements contained in the 1003 application. Credit – The primary borrower is the applicant stating the highest monthly income on the 1003. InterBay utilizes the credit report submitted by the broker to price and grade the loan for pre-approval. All loans are subject to a credit report ordered by InterBay prior to closing. Any change in the applicant’s credit status as determined by a change in the credit score may cause the loan to be re-priced and the LTV lowered. The loan may also be denied for a serious deterioration of credit quality. Assets - InterBay does not verify an applicant’s assets unless the circumstances of the loan, in the judgment of the underwriter, warrant verification of assets. Applications should have sufficient assets to complete the transaction requested in the application. Employment – InterBay does a verbal verification of employment prior to closing. All self-employed borrowers must have a verifiable business in existence at the time of closing. Licenses – InterBay requires all commercial borrowers and self-employed borrowers to submit copies of current business licenses. Special licenses for automotive properties are required, as well as, properties containing underground tanks. Verification of Mortgage - Verification of mortgage payment history is required in instances where the mortgage is not reported in the tri-merged credit report. In these instances InterBay requires 12 months cancelled checks, bank statements or, if applicable, a completed verification of mortgage. Verification of Rent – Verification of rent may be required based on credit history and loan circumstances. The form of verification must be 12 months cancelled checks. A rental verification form can only be utilized in instances where a management company or institution is collecting the rents. Rent Rolls – Rent rolls are required on all properties that contain 5 or more units and any commercial property that is not 100% owner occupied. The rent roll must be certified by the applicant as to authenticity and properly signed and dated. Estoppel Certificates – Estoppel certificates are required for non-residential properties ( 9+ units & mixed-use are excluded) where one or more tenants each occupy 40% or more of the square footage of the subject property. The tenant executes the estoppel certificate and its purpose is to state the tenant’s understanding of the terms and conditions of the lease. In addition, the estoppel certifies to InterBay that the tenant’s rights of ownership are subordinate to InterBay’s rights as the mortgagee. Surveys – InterBay does not require surveys unless the title underwriter will not remove the survey exception for the title report without a survey. Title Insurance – InterBay reserves the right to accept the title insurer. 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No Hassles No Junk Fees No Application Fees No Better Time to Refinance Call Loan Originator, Monica Cobbeldick at 440-808-8926 today! Home of the No Hassle Loan   HERE IS THE EXPLANATION OF THE 1003 FORM'S SECTIONS FOR YOU: I. Type of Mortgage and Terms of Loan Use the fields in this section to describe the basic type of loan you are looking for. II. Property Information and Purpose of Loan This section allows you to describe the property that this loan will be used to buy. III. Borrower Information This section specifies the personal information of the borrower and the co-borrower (if any). This section must be as complete as possible and specifically include the Social Security Number as most financial records are keyed to this number. IV. Employment Information This section allows you to tell us where you work and whom we may contact to verify employment. V. Monthly Income and Combined Housing Expense Information This worksheet section allows us to calculate how much of your monthly expenses will be tied to your mortgage payments. Each loan program has certain limits within which you must fall to qualify. VI. Assets and Liabilities Use this section to list all of your assets and outstanding debts. This section is fairly important. Your past performance in paying your debts will be major factor in what kind of loan you can qualify for. VII. Details of the Transaction You may leave section blank because it contains information that is not known until the loan is approved and all the fees are finalized. VIII. Declarations This section gives us some other background information on your financial situation that may have a bearing on the transaction. IX. Acknowledgement and Agreement You and the co-borrower (if any) must sign this section.  Your signature(s) verify that the information provided in this application is true and correct as of the date of application. X. Information for Government Monitoring Purposes Information on race and sex is voluntary.  Please read carefully and check the appropriate box. Commercial Underwriting Guidelines Commercial Financing is underwritten on a case by case basis. Every loan application is unique and evaluated on its own merits, but there are a few common criteria lenders look for in commercial loan packages. Financial Analysis A key component in making an underwriting evaluation is the debt coverage ratio. The DCR is defined as the monthly debt compared to the net monthly income of the investment property in question. Using a DCR of 1:1.10 a lender is saying that they are looking for a $1.10 in net income for each $1.00 mortgage payment. Typically they will determine the DCR ratio based on monthly figures, the monthly mortgage payment compared to the monthly net income. The higher the DCR ratio the more conservative the lender. Most lenders will never go below a 1:1 ratio ( a dollar of debt payment per dollar of income generated). Anything less then a 1:1 ratio will result in a negative cash flow situation raising the risk of the loan for the lender. DCR's are set by property type and what a lender perceives the risk to be. Today, apartment properties are considered to be the least risky category of investment lending. As such, lenders are more inclined to use smaller DCR's when evaluating a loan request. Make sure that you are familiar with a lender's DCR policy prior to spending money on an application. Ask them to give you a preliminary review of the investment property that you want to purchase. Information is free, mistakes are not. Loan to Value Unlike residential lending, commercial investment properties are viewed more conservatively. Most lenders will require a minimum of 20% of the purchase price to be paid by the buyer. The remaining 80% can be in the form of a mortgage provided by either bank or mortgage company. Some commercial mortgage lenders will require more than 20% contribution towards the purchase from the buyer. What a bank/lender will do is subject to their appetite and the quality of the buyer and the property. Loan to value is the percentage calculation of the loan amount divided by purchase price. If you know what a lender's LTV requirements are, you can also calculate the loan amount by multiplying the purchase price by the LTV percentage. Keep in mind that the purchase price must also be supported by an appraisal. In the event that the appraisal shows a value less then the purchase price, the lender will use the lower of the two numbers to determine the loan that will be made. Credit Worthiness For businesses less than three years old, personal credit of principals will be evaluated. This may hold true for longer periods of time for tightly held companies. For corporations, business performance and credit ratings will be evaluated with a proven track record. Property Analysis Fair Market Value and Fair Market Rent will be analyzed. Special use property may require additional underwriting. Age, appearance, local market, location, and accessibility are some other factors considered. Commercial LTV Ratio The loan-to-value (LTV) ratio is probably the most important of the 3 underwriting ratios. The loan-to-value ratio is defined as: LTV Ratio = Total Loan Balances (1st mtg+2nd mtg +3rd mtg) / Fair Market Value of the Property First let's look at the numerator. If the borrower is only applying for a first mortgage, and there will be no other loans on the property, then the beginning balance of the new loan requested should be inserted in the numerator. However, if the borrower is applying for a second mortgage, then the "underwriter" (the person who determines whether or not the loan qualifies) should insert the sum of the first and second mortgages in the numerator. Similiarly, if the borrower is applying for a third mortgage, then the underwriter should insert the sum of the first, second and third mortgages into the numerator. When the borrower is applying for a second or third mortgage, the loan-to-value ratio is often known as the combined loan-to-value ratio (CLTV ratio). Now let's look at the denominator. Generally the fair market value of a property is determined by an appraisal. There is one important exception, however. When the proceeds of a mortgage loan are used to buy the same property that is securing the loan, then that mortgage is known as a "purchase money loan." If the appraisal comes in lower than the purchase price in a "purchase money" transaction, then the lender will use the LOWER of the purchase price or appraisal. Mortgage brokers are often asked by real estate agents and buyers to base their loan on the appraised value rather than the purchase price. Their claim is that they have negotiated a super deal and that the property is worth much more than what they are paying for it. This may be so (although generally untrue), but lenders always base their maximum loan on the lower of purchase price or appraisal. The lender's argument (its their money, so there is really very little argument) is that an appraisal is really no more than an estimate of fair market value, no matter how competent or conscientious the appraiser may be. The only true indicator of value is the marketplace in which "a willing buyer and a willing seller, each in full knowledge of the salient facts, and neither under undue pressure, agree upon terms." If the property sells for "X," then it is probably only worth "X." Debt Ratios When analyzing the personal budget of a borrower, lenders use two different debt ratios to determine if the borrower can afford his obligations. These two debt ratios are: Top Debt Ratio Bottom Debt Ratio The "top" debt ratio is defined as: Top Debt Ratio = Monthly Housing Expense/Gross Monthly Income By "monthly housing expense" we mean either the borrower's monthly rent payments, or if she owns her own home, the total of the following - Monthly Housing Expense 1st mortgage payment on home plus Real estate taxes (annual cost/12) plus Fire insurance (annual cost/12) plus Homeowner's association dues(if home is a condo or townhouse) plus Second mortgage payment (if any) plus Third mortgage payment (if any). You will often hear the term P.I.T.I. It refers to (P)rincipal, (I)nterest, (T)axes and (I)nsurance. While P.I.T.I. is not exactly the same as Monthly Housing Expense because it does not include homeowner's association dues, the two terms are often used interchangeably. Lenders have learned over the years that a borrower's "top" debt ratio should not exceed 25%. In other words, a person's housing expense should not exceed 1/4 of his income. While lenders will often stretch this number to as high as 28%, traditional lending theory maintains that anyone with a debt ratio in excess of 25% stands a good chance of developing budget problems. The second ratio that lenders use to determine if a borrower can afford her obligations is the "bottom" debt ratio. It is defined as follows: Bottom Debt Ratio = (Total Housing Expense + Debt Payments)/Gross Monthly Income The only difference between the two ratios is the inclusion in the numerator of "debt payments." Debt payments include the following: Debt Payments Car payments Charge card payments Payments on installment loans, for example - a payment on a washer & dryer that the borrower purchased. Payments on personal loans, for example - a signature loan from the borrower's bank. What is not included in "debt payments" is Utilities such as PG&E, water or telephone and payments on real estate loans. Real estate loans are usually offset first by the net rental income from the property. If the borrower has a net positive cash flow from all his rentals, then the net income is usually added to his "gross monthly income." If the borrower has a net negative cash flow from all of his rental properties, then the amount of the negative cash flow is usually added to the numerator of the "bottom" debt ratio as if it were a monthly debt obligation, like a car payment. Traditional lending theory maintains that a borrower's "bottom" debt ratio should not exceed 33 1/3%. In other words, the total of the borrower's housing expense and debt obligations should not exceed 1/3 of his income. Lenders often will stretch on this ratio to as high as 36%, and some have even been known to stretch as high as 40% or more. Obviously a loan with a debt ratio of 40% is a far more risky loan than a loan with a debt ratio of 32%. Debt Service Coverage Ratio (DSCR) The most important ratio to understand when making income property loans is the debt service coverage ratio. It is defined as: DSCR = Net Operating Income (NOI) / Total Debt Service To understand the ratio it is first necessary to understand the numerator and the denominator. Let's take a look at net operating income (NOI) first. Net operating income is the income from a rental property left over after paying all of the operating expenses: Gross Scheduled Rents $100,000 Less 5% Vacancy & Collection Loss $5,000 ________ Effective Gross Income: $95,000 Less Operating Expenses Real Estate Taxes Insurance Repairs & Maintenance Utilities Management Reserves for Replacement Total Operating Expenses: $30,000 Net Operating Income (NOI) $65,000 Please note that lenders always insist on some sort of vacancy factor regardless of the actual vacancy rate in an area to cover collection loss. In addition lenders always insist on using a management factor of 3-6% of effective gross income, even if the property is owner-managed. Their logic is that they would have to pay for management if they took back the property. Finally, NOTE THAT WE HAVE NOT INCLUDED LOAN PAYMENTS AS AN OPERATING EXPENSE. Next let's look at the denominator, Total Debt Service. This includes the principal and interest payments of all loans on the property, not just the first mortgage. NOTE THAT WE HAVE NOT INCLUDED TAXES AND INSURANCE. They were already accounted for above when we arrived at net operating income (NOI). To calculate the debt service coverage ratio, simply divide the net operating income (NOI) by the mortgage payment(s). For the sake of simplicity, let us assume that there is only one mortgage on the property: $500,000 First Mortgage 11% Interest, 30 years amortized Annual Payment (Debt Service) = $57,139 Then: DSCR = Net Operating Income (NOI) = $65,000 Total Debt Service $57,139 DSCR = 1.14 Obviously the higher the DSCR, the more net operating income is available to service the debt. From a lender's viewpoint it should be clear that they want as high a DSCR as possible. The borrower, on the other hand, wants as large a loan as possible. The larger the loan, the higher the debt service (mortgage payments). If the net operating income stays the same, and the loan size and therefore the debt service increases, then the lower the DSCR will be. Life insurance companies are very conservative and generally require a 1.25 or 1.35 DSCR. This means that their loan-to-value ratios are low. Savings and loans (S&L's) generally only require a 1.20 DSCR, and sometimes will accept a DSCR as low as 1.10. A DSCR of 1.0 is called a break even cash flow. That is because the net operating income (NOI) is just enough to cover the mortgage payments (debt service). A DSCR of less than 1.0 would be a situation where there would actually be a negative cash flow. A DSCR of say .95 would mean that there is only enough net operating income (NOI) to cover 95% of the mortgage payment. This would mean that the borrower would have to come up with cash out of his personal budget every month to keep the project afloat. Generally lenders frown on a negative cash flow. Some lenders will allow a negative cash flow if the loan-to-value ratio is less than around 65%, the borrower has strong outside income such as an electronic engineer, and the size of the negative is small. Lenders rarely allow negative cash flows on loans over $200,000.   The bulk of the energy spent "processing" a loan is merely an attempt to verify the numbers that go into the numerator and denominator of the above 3 ratios. The Loan-To-Value Ratio (LTVR) is defined as follows: Loan-To-Value= Total loan balances (1st mtg+2nd mtg+3rd mtg) / Fair market value (as determined by appraisal) Loan-To-Value Ratios seldom exceed 80% because the lender always want some extra protection against default. The second ratio that lenders use when underwriting a loan is the Debt Ratio. The Debt Ratio compares the amount of bills that the borrower must pay each month to the amount of monthly income he earns. More precisely, the Debt Ratio is defined as: Debt Ratio = Monthly Debt Obligations / Monthly Income Obviously someone whose Debt Ratio is 150% is in trouble. A Debt Ratio of 150% would mean that a borrower's obligations are one and a half times his income. Debt Ratios seldom are allowed to exceed 40% in practice. The final ratio used in lending is the Debt Service Coverage Ratio (DSCR). The Debt Service Coverage Ratio is a sophisticated ratio only used for large loans on income producing properties. It is defined as: Debt Service Coverage Ratio = Net Operating Income / Debt Service Net Operating Income is the income from a rental property after deducting for real estate taxes, fire insurance, repairs, and all other operating expenses; and Debt Service is the mortgage payment on the property. Most lenders insist that this ratio exceed 1.0. A debt service coverage ratio of less than 1.0 would mean that the property did not produce enough net rental income for the owner to make the mortgage payments without supplementing the property from his personal budget. Interest Rate Survey Prequalification Wizard Secure Application Market Snapshot Mortgage Calculators Tax Benefits Calculator Payment Calculator Mortgage
Commercial Property Types Listed below is a partial list of properties that require commercial financing.     Multi family     Retail    Garden Apartments Hi-Rise Apartments Mid-Rise Apartments Low/Mod Income Student Apartments Senior Apartments Underlying Coop Regional Enclosed Strip Center Outlet Mall Free Standing Single Tenant Regional Unenclosed     Office     Health Care   Single Tenant Hi-Rise Tower Mid-Rise Office Office Over Retail Congregate Living Nursing Home Rehabilitation Ambulatory Care   Office        Heavy Manufacturing Light Manufacturing Warehouse/Distribution Owner Occupied Multi-Tenant Self Storage Special Purpose Facts on Commercial Lending... (Things my competitors don't want you to know!!!) Typically, to arrange and structure a commercial real estate debt is a complicated procedure especially in the commercial lending area. Traditional Lenders offer high LTV's and comparative rate, but require: • Full documentation (personal taxes and financials) • Large down payment usually 25 to 30% • Strong credit and experience. • Seller carrying a 2nd T.D. are not allowed. • Most loan programs are balloon payments due in 5,7,10 yrs. • Most transactions take from 90 to 120 days to close. • Property requires strong D.S.C.R's . • Environmental studies may be needed (Phase I & II) • Also be prepared for up front fees and others... Hard Money Lenders: • Will finance your property fast • Providing that you pay interest rates between 14 to 16%. • Points from 7 to 10%. • Low LTV's and very short terms typically 1 to 2 years. BUT WE have the Perfect Formula: • Streamline documentation. • Flexible underwriting guidelines. • Comparative rates and terms. • Faster closings.   InterBay Funding Pre-approval Underwriting (We also have 9 additional lenders and investors!)
Have the following items available when you apply: Name and address of your employer(s) and copies of your two most recent pay stubs. Copies of your W-2 forms for the past TWO years. If you have income in addition to your salary, and you wish to have it considered, have copies of your federal tax returns for the past two years. If you are self-employed, have copies of your federal tax returns for the past two years, and copies of your company's year-to-date profit & loss statement, along with a balance sheet prepared and signed by an accountant. Name and address of any financial institution(s) where you have accounts, and copies of your three most recent statements. If you already own property, have the name and address of any institution(s) that holds your mortgage(s) on that property, and copies of your recent statements. A signed copy of your deposit receipt or purchase agreement for your new home. An estimate of your outstanding debt, along with account numbers for your credit cards, outstanding loans, mortgages and bank accounts. Any other information that might give a clear picture of your financial situation. During the loan process, you may be required to provide additional information not mentioned above to speed the approval process of your application. Bay Portal Companies, Inc. POC: Monica Cobbeldick Fax your docs to: 440.250.8889 26509 Russell Rd., Bay Village, OH 44140   InterBay Funding Pre-approval Underwriting (We also have 9 additional lenders and investors!)
PROGRAM:                       *FULL DOC LOANS   ·          Loan Purpose : Permanent first mortgage loans for Acquisition financings and  refinancing.   ·          Financing Size:  $100,000 – Minimum - can go to 25M!!!                                                                                     $3,000,000 – Maximum                                                                                                 Now go up to              $ 3,000,000 Max CLTV 85%   ·          Terms:             6 Months Adj., 2,3,7,15,20 & 30 Yrs   ·          Amortization:                15, 20 & 30 Years   ·          Loan to Value Ratio:     Up to 80% - Multifamily, Mixed-Use Up to 75%- Office, Retail, Warehouse, Self-storage and Mobile Home Parks.                                      95% CLTV Available   ·          Interest Rate:                Fixed from 2,3,7,15,20 & 30 Years                                                                                     Rates starting at 5.500% Rate Locks Available on all  programs.   ·          Collateral:                     First Mortgage, recourse loans.   ·          Prepayment:               Prepayment Penalty waived after two                                                                                                       years if sold   ·          Funding:                       30 to 45 business days following                                                                                                         execution of Application.   ·          Submission:                  The following documents are                                                     required for our initial review:                               1) MetWest submission form. 2) Credit Report (Minimum FICO of 640)   3) Completed 1003 plus Loan Supplement. 4) Rent Roll, 2 yrs Income & Expense  Statements                                Proposals will be quoted within 72 hours.   Financing Options Credit Lines Under a credit line agreement, the lender supplies a business with funds intended to fill temporary shortages in cash that are brought about by timing differences between outlays and collections. Typically used to finance inventories, receivables, project or contract related work. Short-Term Loans Used for seasonal build-ups of inventory and receivables. Generally re payed in a lump sum at maturity, made on a secured basis and are for a term of a year of less. Asset Based Loans Lender advances funds based on a percentage of your current assets. The loan is used as source of funds for working capital needs. Lender typically takes a security position in the assets owned by the business. Contract Financing Funds are advanced to you as work is performed. Payments by the contracting party are generally made directly to the lender. Factoring Factors actually buy your receivables and rely on their own credit and collection expertise. Essentially, your customers become their customers. Factoring is used by firms who are unable to obtain bank financing. The cost of financing is usually higher than other forms of S-T financing. Term Loans Used to finance your permanent working capital, new equipment, buildings, expansion, refinancing, and acquisitions. Commercial banks are the major source of funding. The term of the loan is based on the useful life of the assets being financed or collaterized. Your projected profitability and cash flow are two key factors lenders consider when making term loans. Equipment and Real Estate Loans Loans are fully secured by the equipment being purchased. Typically banks loan 60-80% of the value of the equipment and is repaid over the life of the equipment. Lenders make long term loans secured by commercial and industrial real estate. The loan is usually made up to 75% of the value of the real estate to be financed. Repayment terms range from 10 to 20 years. Lenders also make second mortgages on real estate. The amount of the second mortgage is based on the appraised market value and the amount of the first mortgage. Leasing Can be accomplished through a bank, leasing or finance company. Your business will be subject to the same type of review as when seeking a loan, specifically cash flow of company, value of lease object and useful life. Lease terms range from 3 to 5 years. At the end of the lease, there are generally 3 options: purchase, renew and return. 3-15 YR Balloon loans Balloon loans offer interest rates that are fixed for a period of years. Typically these loans are pegged to a treasury index. Terms are for 3, 5,7,10 or 15 years. The amortization schedules are generally for 20 or 25 years. When a balloon loan matures at the end of the agreed term, the remaining principle balance outstanding is due at that time. The borrower can pay off the loan by either selling the property or refinancing. Investment property is typically owned for a previously defined period of time. Analyze your investment strategy before securing a balloon. Having to redo a loan is expensive. Adjustable rate loans An Adjustable rate loan will typically fully amortize with no balloon features. These loans may or may not have adjustment caps. The rate is determined by an index plus a margin. The indices used are generally U.S. treasury bond rates. Rates are adjusted at a certain point in time using either the current rate of the index in question or the average of the index for the prior year. In either event, the index used will correspond to the adjustment term. If the loan is a three year adjustable, then the index used should be the three year treasury index. Some adjustable rate loans are fixed for an initial period of years and then will adjust after that period. For example a 5/1 adjustable is fixed for the first five years and there after will adjust each year. The index used will be the one year treasury rate. Please note that commercial lending is not standardized as it relates to programs and to guidelines. Banks must meet certain federal standards, but the index, margin, amortization, term and fees are components that are controlled by the investor based on their risk profit analysis. Remember that this mortgage will be the greatest expense your investment property will be responsible for. As such we recommend that you consult your real estate agent and your loan officer to assist in providing you with all the information needed to make a complete and accurate choice.
Questions to Ask Yourself Are you and your business credit worthy? -Your personal and business credit ratings will be analyzed. What kind of money do you require? -Short, long, intermediate term money or equity capital. How much money do your need? -Present exactly what you need and what it is for. Do you have sufficient collateral? -Your collateral must equal the loan amount at a minimum. What are the Lender's rules? -Ask about Loan to Value's and Debt Coverage Ratios. What kinds of limitations will be set by you? -Know your comfort level with rate, payment, and term. Proposed Loan Proceeds Disbursement Refinance P/O Mtg   Purchase Purchase Price     P/O Taxes     Down Payment     Closing Costs     Seller Financing     Cash Out     Loan Amount     Other     Other     LOAN TOTAL     LOAN TOTAL               Proposed Loan Terms Rate     Am Term     LTV     Type     Prepay     Lockout                     Proposed Collateral Year built   Address   # of Buildings:   Sq. footage:   Lot size:   Occupancy %   O/O%   # of Units in subject property   # of Units O/O   # of Units Non-O/O   Urban or Rural   Describe specific use of subject property:     Describe all businesses that occupy subject property (ie. shoe store, boutique, dry cleaners, etc.).     Orig. Purchase Price Date Income Expense NOI Real Estate Value Source Date Summary (Explain purpose, history, relevant property info)         FOR OFFICE USE ONLY FICO EXP TYPE LTV DSCR DTI Company Name ____________________ Ph: ______________ Fax _____________
ANNUAL INCOME                                                                                                               LAST 12 MONTHS RENTAL INCOME COLLECTED   OTHER INCOME             TOTAL INCOME COLLECTED     ANNUAL EXPENSES                                                                                                                                    LAST 12 MONTHS TAXES   INSURANCE