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I recently attended a seminar for commercial lenders in Atlantic City, and one of the things that came through was specifically what lenders were looking for to get approved for a commercial mortgage. So, I have put this together as a cheat sheet for the average punter who does not have bankers beating down his door. Securing a commercial mortgage can be a complex process, but understanding what lenders are looking for can significantly improve your chances of approval. Here are seven critical criteria they focus on:   1. Cash Flow and Debt Service Coverage Ratio (DSCR) Greater Than 1.3 The Debt Service Coverage Ratio (DSCR) is a crucial metric that lenders use to assess a property’s cash flow relative to its debt obligations. A DSCR greater than 1.3 means…

Navigating the complex world of commercial mortgages can be a daunting task for any business owner. According to IBIS World, there are 4,867 commercial lenders across America. The chances of a commercial borrower finding the right one on their own is about as likely as finding a needle in a haystack. This is where the expertise of a seasoned mortgage broker becomes invaluable. Here’s why working with a knowledgeable broker is crucial for securing the best commercial deal. 1. Expertise in Lender Preferences Commercial mortgage brokers have a deep understanding of the diverse landscape of lenders. They are well-versed in the specific preferences that different lenders have regarding commercial deals. Some lenders might have a particular affinity for certain geographic locations, while others may focus on specific types of properties…

As we navigate the current economic landscape, savvy borrowers and investors are keenly aware of the potential for lower interest rates in the future. The Federal Reserve’s monetary policy hints at forthcoming rate cuts, which could significantly impact your commercial loan decisions. One critical aspect to consider when securing a loan is the prepayment penalty, a clause that can have a profound effect on your financial flexibility. The Downside of Prepayment Penalties Prepayment penalties are charges that lenders impose if you pay off your loan early. These penalties can be as high as 5% of the loan amount if you refinance or pay off your loan within the first year. While this might seem like a minor detail at the outset, it can lead to substantial costs, especially if interest…

Mortgage rates have seen a decline across the board this week, providing a glimmer of hope for prospective homebuyers. According to the latest data, rates for 30-year fixed, 15-year fixed, 5/1 adjustable-rate mortgages (ARMs), and jumbo loans have all dropped. This slight decrease offers some relief amidst the continuing challenges of high prices and elevated interest rates. Despite inflation cooling somewhat, homebuyers still face significant hurdles in the current market environment. The Federal Reserve's recent decision to hold off on changing interest rates at their June 12 meeting highlights the ongoing uncertainty in economic policy. The Fed’s stance of maintaining higher interest rates for an extended period appears increasingly untenable as consumer spending pulls back and economic indicators suggest potential rising unemployment. As the economic landscape evolves, there is speculation…

If you're seeking financing for a home over a million dollars, chances are you have heard these options: jumbo loans and conventional loans. A conventional loan, typically offered by private lenders, is what most people think of when considering a mortgage — a fixed interest rate loan covering most of a home's purchase price. While a jumbo loan technically falls under the conventional loan category, it is distinct in several key ways, particularly in the amount of money it allows you to borrow. What Defines Jumbo and Conventional Loans? A conventional loan is not backed by the federal government but instead originated, financed, and guaranteed by private lenders. These loans can be either conforming or nonconforming. Conforming loans meet the Federal Housing Finance Agency (FHFA) requirements, including loan size limits…

VA loans, backed by the U.S. Department of Veterans Affairs (VA), offer eligible active-duty military members, veterans, and surviving spouses a unique path to homeownership. These loans come with a variety of benefits, making them an attractive option for those who qualify. However, like any financial product, they also have their drawbacks. Understanding the pros and cons of VA loans can help potential borrowers make an informed decision. One of the most significant advantages of a VA loan is that it requires no down payment. Unlike conventional mortgages that often demand at least 20 percent of the purchase price upfront, VA loans enable eligible borrowers to buy a home without any initial cash investment. This feature alone makes homeownership accessible to many who might otherwise struggle to save for a…

From conventional to government loans, there are many types of mortgages to suit borrowers with varying credit scores and financial means. While there isn’t a standard baseline income to qualify for a mortgage, you’ll generally need enough income to repay the loan. Understanding how qualifying for a mortgage works and how your income can impact the decision is crucial for prospective homeowners. There is no single, universal income requirement to qualify for a mortgage. It all depends on the amount you need to borrow, current interest rates, and the type of loan you’re applying for. Rather than requiring a specific amount of income, mortgage lenders review your credit and financial information to determine how much mortgage you qualify for and whether you can afford the monthly mortgage payment. Lenders evaluate…

As of March 2024, the National Association of Realtors reported that 28% of home purchases were made with all-cash offers. This significant portion of the market reflects a growing interest in forgoing traditional mortgage financing. However, the decision to pay in cash shouldn't be made lightly. There are distinct advantages to all-cash acquisitions, yet there are also critical financial and strategic factors to consider before foregoing mortgage opportunities. Advantages of Buying with Cash One clear advantage of an all-cash purchase is the leverage it may provide in a competitive real estate market. Sellers often prefer cash offers because they promise a quicker and more secure transaction without the risk of buyer financing falling through. Additionally, cash buyers avoid many of the fees associated with obtaining a mortgage, such as origination…

We know barbecue season is coming, but today we aren't talking about dry rub season, but mortgage seasoning. If you're in the market for a new home, you've probably heard about the best times to buy based on market trends. However, there's another important timing factor to consider: mortgage seasoning. This term might seem a bit technical, but it's actually pretty straightforward. Mortgage seasoning is all about how long your money needs to be in your bank account before you use it for things like your down payment and closing costs. Lenders check this to make sure the funds aren't just appearing overnight. They want to see that you’ve managed this money over a set period, which shows you’re ready to handle the financial commitment of buying a home. Mortgage…

Homeowners looking to tap into their home equity for financial flexibility or to fund large projects often look at two main options: Home Equity Lines of Credit (HELOCs) and cash-out refinances. Both of these methods offer unique advantages depending on your financial goals and the amount of equity you've built in your home. While a HELOC provides a flexible line of credit, a cash-out refinance allows you to restructure your mortgage under potentially more favorable terms while accessing a lump sum. The Flexible Nature of HELOCs A HELOC is ideal for homeowners who need access to funds over a period of time, whether for phased home improvements, education expenses, or other ongoing needs. This type of credit offers a draw period typically up to 10 years where you can borrow…