Typically, the lender will then discuss the deal internally with the senior lender or credit officer, and if the bank is comfortable with the deal, they’ll issue a term sheet and move forward with the full underwriting process. For example, if your project was an office building, you might submit a rent roll and a proforma for the lender to evaluate. A home builder line of credit will likewise have additional requirements, such as advance limits and aging limits.Īt this stage, the borrower might submit some supporting documentation for the property. For construction loans, the lender will have other requirements such as a loan to cost ratio or interest only periods. For example, for an existing and stabilized office building, the lender will have specific requirements for the loan to value ratio, debt service coverage ratio, debt yield, amortization period, and loan term. You should get a better understanding of current interest rates, and the bank’s current internal loan policy, which defines guidelines for different types of loans. The purpose of this discussion is to give the lender a better understanding of your project, and to also learn how the lender would underwrite a project like yours. ![]() In this article, we’ll discuss how lenders underwrite commercial real estate loans, and how to determine the maximum loan amount for a property.īefore a new loan goes through the full underwriting and credit approval process, the lender and the borrower will often have a preliminary discussion. ![]() Understanding the commercial real estate loan underwriting process can give you an advantage when seeking debt financing for a commercial property.
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