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Apartment Building Loans
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What
would you need to provide in order to obtain a pre-approval letter? How to
qualify for apartment building loans? If these are your questions that do not
provide you satisfactory answers, keep on reading and you’ll get them answered
here.
Various
Government bodies offer some of the most popular non-recourse loans whereas
other non-recourse lenders would provide you commercial mortgage backed securities.
All of them securitize their loans and sell off parts of the loan pools as
rated and unrated securities. This requires a certain level of underwriting
consistency. As a result, these lenders have general underwriting guidelines
that we can use to determine if your particular loan request would likely
qualify for apartment building loans under one or more of these lenders
programs.
Deciding Factors to Qualify for Apartment
Building Loans
Lenders
that retain and hold their loans are commonly referred as portfolio lenders.
This would often include banks, credit unions, insurance companies, and pension
funds. Each of these lenders has unique underwriting requirements. Generally, lenders
from insurance companies are looking for the higher quality properties less
than 10 years old. Banks generally require all or partial personal recourse.
Some
banks will consider non-recourse terms when the loan to value drops below 60%. With
recent changes in some of the regulations affecting credit unions, they can now
offer non-recourse loans. While credit loans have the regulatory ability to
originate non-recourse loans most require some form or recourse, unless the
loan to value falls to the 50% to 60% range, then it is lender specific.
While
Fannie and Freddie Mae small balance apartment building loans assure as low as $750,000,
they usually only consider qualify for an apartment building loan below one
million when tied to another loan or a large client relationship; otherwise,
you should expect the loans to start at one million dollars. When applying for apartment
building loans, double check your credit score, debt and asset ratios as well
as analyze your debt to income ratios.
The
property being acquired is not generally expected to provide any net income
that could be used to repay the debt. So, the lender looks long and hard at the
source of repayment, your reoccurring income from your job to determine if you
can qualify for a loan of anonymous dollars. When buying and financing and
apartment building, to qualify for an apartment building loan most of the same
factors used in qualifying for a home loan are used; plus, the net income from
the apartment complex. This is why lenders simply can’t use pre-qualified
letter until they underwrite the subject apartment property.
Choices during Qualifying Process
of Apartment Building
Loans
When
it comes to length of the term and amortization, you can obtain a loan term
equal to construction period, plus 40 years especially if you are starting from
ground up construction. For the refinancing of existing properties, you can get
the offer term and amortizations schedules of 35 years. Fannie Mae, Freddie
Mac, and other lenders offer 30 year amortization. Only Fannie Mae offers fixed
rates of 30 years. The most common term or balloon note period is 10 years with
a 30 year amortization for Freddie Mac and mortgage lenders.
Some
banks have specialty niches for apartment building loans offering fixed 10
years, floating rates or a 10-year term with 25-year amortization with rates
that adjust in five years.
Normally,
a lender will provider slightly better interest rates on the loan with the most
unfriendly prepayment penalty. You might save money by going with yield
maintenance over the step-down prepayment. The interest rates to apartment
building loans vary based on a number of factors, which lender, term, loan to
value etc.
So,
discuss briefly about the benefits of apartment
building loans for you at a chosen lender and get the best loan terms on
flexible rates.
