Questions To Ask Potential Lenders

[Steven Pierpaoli]

My partner and I are jumping from multifamilies with conventional mortgage financing to 10-20 unit properties with plans for commercial financing. We have been fortunate to obtain warm references from a developer to a few commercial lending officers at local banks, and have some lunch meetings planned to start our relationships.

What sort of questions should we be asking our potential lending partners? I understand the preapproval concept before shopping for multifamilies, but from browsing the forums it seems that preapproval isn't quite the same for commercial properties? Should my partner and I expect to "start a file" with these bankers (income statement, credit scores, etc.) so we can then go deal shopping - or is it more typical to bring a "real" deal to these bankers?

Grateful for any advice. Thanks.

[Darryl Dahlen]

Questions to ask:

1. What is a realistic LTV for me and my partner and the market we're looking at? You want to know what LTV can qualify for, not a high-net worth borrower with loads of experience who has a long relationship with them. You're new so it's important to know what terms you realistically stand to get.
2. What are your current closing times?
3. What goes into the approval process? Some banks, not many, will issue a term sheet with little to no pre-underwriting. You want the lender to do a lot of analysis prior to you engaging them so everyone from the LO, UW, and credit officer are comfortable with the loan request. This helps to ensure the terms don't change and any obvious hiccups are known upfront and can be addressed.
4. Do you allow seller 2nds?
5. What if there is any differed maintenance issues. Do you allow a LTC approach?
6. What is your PPP?

Most lenders aren't interested in looking at anything until there's a property involved. It ties up man hours, but they'll likely be happy to talk to you and give you advice on what kind of property, market, loan size, etc. they like and don't like.