How can I get approved for a loan?

Question

Greetings,

What do I need to get approved for a commercial loan? I dont own any property but looking into buying multi family building around 600-800k. What would be the best way for me to get approved? Thank you in advance

Tom S. · Answer

@Junior Shay  6 months reserves means you have money set aside that you can prove will cover 6 months of payments (sometime tax and insurance too).  So if your payment is $3k/mo, they want to see $18k in the bank, above and beyond the down payment and closing costs.

Just call around with lenders and see what they're exact requirements were. Sometimes you can use assets such your stock accounts or 401k for the reserves, not actual cash.  But again, each lender might be slightly different.

Good luck!

Mike Burkett · Answer

@Junior Shay  To answer your question.  Get pre-qualified with a lender.  We do it all the time.

Junior Shay · Answer

What do you mean by 6 months reserve? Sorry I’m new so I’m learning all those stuff.

Jaysen Medhurst · Answer

Are you asking about insurance or reserves, @Junior Shay? You need both. Bank may be willing to go with lower reserves, depending on the deal. Never hurts to ask!

Tom S. · Answer

@Junior Shay  I have a number of commercial loans, and yes, you absolutely will need insurance.  It shouldn't be too much, I pay about $2500/yr for my commercial properties.   20% and good credit is a starting point.  As other mentioned, 6 months reserves are also important.  Remember a commercial appraisal is more, about $1500, and that will be out of pocket on your side.

Good luck!

Junior Shay · Answer

What about if I have no insurance but I can put 20% down plus good credit history?

Jaysen Medhurst · Answer

How's your credit, @Junior Shay? It matters, but not as much. What kind of down payment and reserves do you have? A bank will want to see 20-25% down and 6 months reserves.

The nice part about a commercial loan is that the lender is more interested in the deal and experience of the operator. The deal needs a good DSCR (1.2 or better, in most cases). If you don't have experience, they may not go for it. Consider partnering up with someone with a track record.

Jacob Sampson · Answer

Have a high income and credit score, low debt, and 20% to put down.