Commercial Mortgages for Multifamily Properties Checklist
Multifamily properties have become popular investments among real estate investors and it is no wonder why. The ability to have many streams of income is a perk like no other. Construction spending on multifamily properties has even outpaced construction spending for single-family homes. If you are considering getting financing for multifamily properties, here is a checklist of some things you will need to get the process moving quicker and eventually approved.
✓ A Loan Submission Summary/Form
One of the first things you will need to do when applying for financing is proving that you are a viable borrower. By filling out the loan submission summary, your lender has a clearer understanding of what you are looking for and if you are able to obtain the amount, with the conditions your asking. It’s the first step to take to claim financing for your multifamily properties.
✓ Know Your Credit Score
When developing your loan submission summary, you will want to make sure that you credit is on the right path. This may take some preplanning to improve it, but it will be worth it in the end. Better credit scores will bring about larger borrowing amounts and better rates and loan terms.
✓ Know the LTV (Loan-to-Value)
The loan-to-value is the ratio of a loan to the value of an asset purchased. For acquisition of multifamily properties, you could see up to 80% LTV. That means, if you are looking to purchase that multifamily property for $100,000 you could get approved for $80,000 – you would provide the rest ($20,000).
✓ Understand the DSCR (Debt Service Coverage Ratio)
The DSCR is the amount of debt you can support by the revenues generated by your multifamily properties. Calculating the DSCR is one of the most important factors that go into deciphering your fundability for a commercial mortgage. Mathematically, it is the net income generated by the property divided by the new loan payment. Having good knowledge of this will help yourself identify if you are on the right path for financing approval. Normally for multifamily properties the DSCR should be over 1.20x to be approved.
Multifamily properties are growing in popularity as investors are seeking great returns. If you are knew to the industry or would like to add to your list of properties, commercial mortgages from alternative lending is a great option. Loan approval is much more obtainable through alternative lending than a bank, and that is only the beginning of the benefit list.