Chinese (Simplified)EnglishGermanSpanish

Differences between residential and commercial loan origination

Sep 19, 2018 | Blog, Uncategorised

1. Location: unlike residential loans where the loan in Newport Beach and the loan in the middle of nowhere are treated the same , lenders for commercial loan have different appetite for different locations and they price the loan accordingly. The majority of them will not lend in cities that have less than 20,000 in population. Some of them will not go into 3rd tier or even 2nd tier cities. So, make sure you check with the lenders on their lending areas before going further.

2. Property type: with residential loan, there is only one kind, 1-4 units. With commercial loans, you will run into a variety of what we call “property classes” such as apartment complex, office building, retail center and the list can go on and on. No commercial lender will do each and every property class so make sure you check with them the type of property that they will lend on.

3. Income requirement: for residential loan, the stated income loan became extinct after the crisis with all the new rules and regulation. There are some changes on the commercial loan side too. Some bank will require personal income tax now to do what they call “ global underwriting”. What it means is besides the income generated from the property itself, the borrower(s) personal income has to be able to support all his/her personal liabilities. Unlike residential loan, more than a few commercial lenders still offer the stated income program for a higher rate. So , whenever you see such an attractive rate advertised, make sure you check with the lender(s) on the personal income requirement.

4. Interest rate & fees: for residential loan, it’s rate sensitive environment. Lenders compete for business with a .25 or even .125 difference in rate. However, for commercial loan, the loan amount the borrower(s) ask for is the decisive factor because commercial means investment and people try to leverage as much as possible. Lots of time, people are willing to accept the higher rate and fees for a higher loan amount. Therefore , make sure you can get the loan amount the borrower(s) want before discussing about the rate and fees.

If you have any other questions, please call Eric Tran at 714-300-8223

Have More Questions About This Article? Feel Free to Contact Us.

6 + 6 =

Basics you need to know about fix and flip loans

  So, what are Fix and flip loans?   Let’s go through the things you should know if you want to start flipping or if you are just interested in learning more. Fix and flip is a real estate investment strategy and it consists in purchasing a property in need of...

Covid-19 and Commercial Loans Trends 2021

What is the biggest challenge you anticipate in 2021 as a direct lender or financial intermediary in commercial real estate? In 2021 it will be challenging to meet the business needs of Borrowers using hotel/restaurant properties as collateral to secure their loan. In...

Small is Beautiful: The Revival of US Rural Areas

Year of 2020 was no like other. It looks like the Covid-19 pandemic sent the crowded urban life style preferred by many bohemians and younger professionals in the past as new migration trends are identified by moving companies. BTW: Moving industry is the one sector...

Construction Loan Programs: The 3 Key Benefits to Consider

The purpose of a construction loan is to finance the building of a new residential real estate property. The projected market value of the subject property is used to secure the lending and the loan proceeds are distributed by the Lender via separate “draws”....

10 Common Pitfalls to Avoid in the Fix-and-Flip Process

Fix-and-Flip projects are generally seen as promising business opportunities that can generate quick cash profit and good return-on-investment (ROI). An entrepreneur may need to completely transform a property or simply do some tender renovations before the building...

Real Estate Investment Strategies: Fix-and-Flip or Buy-and-Hold

Many real estate entrepreneurs are purchasing properties with the idea of receiving good return on investment for their cash and increasing their wealth. A business person can choose to implement both the Fix-and-Flip or Buy-and-Hold strategy and the decision depends...

Our Success Story: 130 Coolwater Lane, Barstow, CA 92311

Universal Commercial Capital (UCC) focus is on finding the right financial solutions for customers that may experience issues with obtaining a business purpose loan from lending institutions as banks. Our team is dedicated on assisting each and every Borrower receives...