Commercial Loans Huntsville AL
1004 Jordan Lane NW Suite 3
4294 B University Dr.
4245 Balmoral Dr Sw
1St Family Mortgage Company
7535 S Memorial Pkwy
300 Clinton Ave W
World Finance & Tax Service
3016 University Dr Nw
Magellan Mortgage Service Inc
1803 University Dr
305 Church St Sw Ste 100
200 Clinton Ave W Fl 11
201 Williams Ave Sw
Commercial Loan Processing
It is important to understand the process behind commercial loan processing to gain an insight into how a financing institution assesses and decides on whether or not a loan is granted. While commercial loans provide an attractive source of income in terms of interest, lenders exercise a lot of care in evaluating borrowers to ensure that funds lent out are recovered along with the earnings.
Applying for a Loan
Lenders basically pre-qualify potential borrowers by assessing their background and capacity to pay. The process starts by initial gathering of background and personal information such as purpose for the loan, your income and existing debts. To formalize and commence the loan process, you must then fill-up and complete a loan application form .
Requirements to Expect
Take note of the documentary requirements that will go with your loan application . This may require some consideration and time to gather. A business loan for example, may require a business profile that gives a general background of your business. In addition, a business plan that clearly describes how your business will be run and how it is projected to perform financially will be required.
Standard requirements for different loan types will include personal financial statements listing all personal assets, liabilities, as well as your personal tax return for the past three years. Another fundamental requirement is collateral. Collateral for a loan may include assets such as real estate and stocks or bonds, hard goods such as equipment, and other personal assets and guarantees. This is meant to give the lender some guarantee that you will be committed to seeing your loan repaid. It also offers assurance that should you fail to meet your loan obligations, they can recover from your assets the money that they have lent out.
Processing Your Application
A loan officer will review your application and documentary attachments. Your loan officer will review your credit reports, collateral documentation, as well as your income information. Some additional documentation may be requested in order to support the information in your loan application so that all details may be properly assessed and verified.
Once all documentary attachments are deemed satisfactory, your loan application will then be submitted to a loan underwriter or a loan committee. They will review, assess, and eventually decide whether your loan will be approved.
At this time a processor will present you with a letter of intent or term sheet for signing. This document includes the amount of financing, terms of payment, type of security or collateral, and other key terms. The decision to approve or reject is usually made within five days. Expect some requests for you to provide additional documentation during this underwriting process.
You will be required to sign the letter of intent and along with it, you may be asked to give a check ...
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Understanding Commercial Loan to Value Ratio (LTV)
For the uninitiated the factors involved with the decision of whether or not to lend money, and at what terms, can seem random and hard to fathom, but in most cases these lending decisions break down into three important ratios. The ratios with which every potential commercial borrower must become familiar include:
Debt Service Coverage Ratio (DSCR) Debt Ratio (DR) Loan to Value Ratio (LTV) Of these three factors, it is the last ratio, the loan to value ratio, or LTV, which is the most important in terms of underwriting. The loan to value ratio is defined as shown below:
LTV Ratio = Total loan balances (including all mortgages) / the fair market value of the property
In order to understand this ratio and what makes it so important, it is important to take a look at all the factors that make up the ratio, starting with the first number. If the commercial or residential borrower is taking out a first mortgage or loan, and there are no other loans on the property, the beginning balance of the new loan being requested will be the numerator.
If, on the other hand, the borrower is applying for a second mortgage, the underwriter will add the sum of the first mortgage and the amount of the proposed second mortgage to arrive at the numerator. If the borrower is applying for a third mortgage, the proposed amount of that third mortgage would be added to the existing amounts of the first and second mortgage loans.
In cases where there is an existing mortgage on the property, and the borrower is applying for a second or third mortgage, the loan to value (LTV) ratio is sometimes referred to instead as the combined loan to value, or CLTV, ratio.
The second part of the LTV ratio is of course the fair market value of the property being financed. This number is arrived at via an independent appraisal, with one important exception. That exception occurs when the proceeds of the mortgage loan will be used to purchase the same property that is being used to secure the loan. That type of mortgage is known in the industry as a purchase money loan, and in cases where the appraised value is lower than the purchase price the lender will use the lower amount in order to calculate the LTV ratio.
While the potential lender will of course calculate the loan to value ratio at the time of the loan application, it is a good idea for potential borrowers to calculate their own loan to value ratio prior to applying for a residential or com...
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