Begin loan processing:
Although most lenders must conform to standards set by government agencies, loan approval guidelines vary greatly depending on the terms of each loan. In general, approval is based on three main factors:
- Income of the subject property;
- Value of the subject property; and
- Borrower’s ability and willingness to repay the loan; credit history, etc.
Once your loan application has been received, we will immediately begin loan processing and underwriting. We will verify all of the information you have provided, and we shall update all of your financial statements, statements of real estate owned, rent rolls, operating statements, and more. If any discrepancies are found, either the processor or your loan officer will troubleshoot to rectify/adjust/clear the matter. This information includes:
- Is the combined income of the subject property and your personal income sufficient to cover the requested loan amount monthly payments on a global underwriting analysis? We will carefully and diligently underwrite all documents and financial statements to make sure there exists sufficient income and assets to support the loan prior to any loan submission.
- What is your ability to repay debts when due? Your credit report is reviewed to determine the type and terms of previous loans. Any lapses or delays in payment are considered and must be explained in writing via a Letter of Explanation (“LOX”).
- Do you have the funds necessary to make the down payment, pay all closing costs, and to still have sufficient reserves to meet the minimum reserve requirement for the requested loan? We will evaluate all such details and scenarios.
- Is there sufficient value in the property? The property is appraised via MAI® (Members of the Appraisal Institute®) appraisers to determine current market value. If the subject property is five (5) years old or less, the appraisal will be based upon three valuation methods: Income Approach, Market Approach, and Cost Approach. The appraiser will then reconcile the three valuations to make his final value determination. On the other hand, if the subject property is greater than 5 years old, the appraisal will only be based upon two methods of valuation: Income Approach and Market Approach; the appraiser will then reconcile the two valuations to make his final value determination.
- In some cases, additional documentation may be required before making a final determination prior to receiving a loan commitment.
In order to improve your chances of receiving a loan commitment (in commercial loans, a loan commitment is the equivalent of receiving a loan approval on a residential loan):
- Fill out your loan application completely. You may use our online forms to expedite the process.
- Respond promptly to any requests for additional documentation especially if your rate is locked or if your loan is due to close by a certain date, such as in a commercial property acquisition/purchase.
- Do not move money into or from your bank accounts without a proper paper trail. If you are receiving money from friends, family or other relatives, please prepare a gift letter and contact us.
- Do not make any major purchases or apply for any other loans whether personal or business until the subject loan is closed! Purchases cause your debts to increase and may have an adverse effect on your current application, credit scores, etc. During the loan application/processing period, if you find it necessary to make any financial moves, we would request that you contact us via email or telephone to discuss your desires prior to making any moves.
- It is best not to plan any out of town trips on or about your intended loan closing date. If you plan to be out of town, sign a Power of Attorney to authorize another individual to sign on your behalf when your loan is expected to fund. Again, during loan processing, underwriting, and before the loan closes, it is best just to be diligent about requested paperwork/documentation, and to be available during business hours.