What is minimum down these days for commercial?

6 Replies

Here are a couple basic questions to finance an owner-occupied 14-unit apartment complex priced at $3m...
What is the min. down payment required?
Is there such a thing as "stated-income" for a commercial loan?
(Seller financing is not an option.)

The capacity to pay the loan is at the top of the list of requirements, but it's not going to be a loan program with verifications of a borrower's income and qualify.

Let's assume the property passes the collateral requirements.

There is an old saying that you can get a loan if you can prove you don't need it, in other words there just isn't any way the repayment would not be made, few will meet that test.

As to LTV, it is generally 20% or 25% down, at that amount many lenders may want 30% down, that might be had with a combined loan to value meaning a seller could carry back 15% (20%), buyer has 10% down and finance 75% (70%). Other arrangements might be made, pledging other assets, that could put you at 100%. A lender may allow an assumption of an existing loan keeping the original borrower on the note.

Much of your down payment required will hinge on the buyer's abilities, credit, capacity, management experience, assets and the property will be assessed as to value, condition, location, market and collateral issues.

Commercial loans are on a case by case basis, not at all like secondary market residential lending.

If credit and income is very good, down payment would be apprx. 20% down. We have found that even with credit and income most banks are requiring 30% down. It varies as always however before you let anyone look into your credit shop around with mortgage companies. As much as it pains me to say Wells fargo is on top of loans in the rankings these days. Mixed use buildings you can pretty much assume that down payment will be 30%. also not all the money needed for down payment needs to be directly from you, you can have a relative gift you funds for closing if it is documented. Speak to some mortgage reps. and way your options before committing to one company.

@Shari Posey The other day I ran across something while doing a search on commercial properties, offering stated income loans for commercial properties, and I believe it was in So Cal. Sorry I didn't save it, but maybe you can google it. Good luck.

There are numerous factors that probably play into a mortgage rate since it is apparent that the big banks are loosening lending rules. If that's the case then who knows what a down payment would be for a property. I would assume at least 20% but wouldn't be surprised if they wanted more especially since it is a $3M property.

Some banks do require 25 or 30% down, (70- 75 LTV). WE are currently at 80 LTV and can go to 85 LTC. ( Loan to Cost- adding in closing, acquisition) As far as Stated Income; You have to show docs but we don't call it Stated Income. We do multifamily loans without tax-returns but the building has to be financially strong. However we still need: (Rent Rolls, operating statements, financial statements and so on).

Most banks will accept 20% down depending on the property. Expect to provide at least two years of tax returns. I don't think there's any way to get around that.

Also, the bank must generate at least 120% more income than the mortgage - after all the expenses are factored in. Those expenses will include at least a 10% vacancy rate, 3% management fee (even if you self manage) et cetera, et cetera. Depending on the lender, they can really pile on the expenses that they use in their calculation. If the cash flow isn't there, they'll expect the buyer to come up with more down payment.