Do commercial lenders look at a borrower’s income?
Jul 08, 2009
in
Commercial Mortgage FAQ
I am looking to buy a 6 flat apartment building and I would like to know if commercial loan lenders look at a borrower’s income or just the income potential of the property itself.
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2 comments
Skip on July 8, 2009 at 9:35 am
When you purchase any type property you have to be able to prove you have the income to pay for what ever you are purchasing.
Most commercial lenders will allow you to use a certain percentage of the rental income normally about 75%,but they also ask the question what if there are no tenants,who will pay and how will he pay if their are fewer tenants than a full house?
So in answer to your question the lender will look at your income, other assets you might have, your credit report as well as the amount you are gonna put down as the down payment.
If you still have a mind of greeting the flats, you might see if you can find a financial partner to go in with you to purchase the place. He would put up the money for the down, also credit report, and possibly his assets.
You in turn would do all the management duties, bookkeeping,maintenance and other things and share in the income based on a percentage agreed upon by the two of you.
I hope this has been of some use to you, good luck.
"FIGHT ON"
Kevin B on July 8, 2009 at 9:35 am
There are two ways to qualify your income for a commercial loan.
1. Debt ratio
2. Debt service coverage
The Debt Ratio is based on your current income and all your debts on the credit report + the new debts from the property.
The Debt Service Coverage is only based on the property. They take the income of the property and compare that to the housing costs (Principle, Interest, Taxes, and Insurance). If you are bringing in well more than the property is costing you they may ignore your debt ratio completely.
I suggest you speak to a mortgage broker. Banks usually want to see your complete financial picture. Mortgage brokers have access to more lenders with more flexible programs.
If you want to learn more about the mortgage process and what brokers do, check out my blog: http://explaintome.blogspot.com
Good luck.