Commercial Loan Information

[Amitabh Tewari]

Hello all,

I am looking to venture into real estate investing of owing rental properties. I am looking to get a commercial loan to start off. Can anyone please send me the requirements needed to get a commercial loan of upto $220,000?

I already own a home in Pittsburgh and have mortgage on that. How will the commercial loan be different? Is there a threshold for number of commercial loans one could have? Will a commercial loan lower my capability to take future residential mortgages or vice versa?

Thanks in advance,

Amitabh

[Steve Wilmers]

Hi Amitabh,

Requirements will vary depending on the bank, but I'd expect a typical bank to require a 20-25% down payment, and the loan will probably be set on a 5 or 7 year term with a 15 to 20 year amortization.  This differs from your personal mortgage in that your mortgage is likely a fixed rate for the entire repayment of the loan.  On a commercial note, the bank is only committing to you for 5 years of the potential 20 year repayment period.  After this 5 year period, you (and the property) will need to be re-approved by the bank.

What type of property is it?  Multi-family?  If it is a 1-4 unit residential property, you may be able to work with a residential lender and just call it an investment property.  I would attempt to go this route first, as it saves a significant amount of hassle compared to a commercial loan, and you would then be able to fix the rate over the 30 year period instead of just a portion of the note.

Regarding the capability of future residential mortgages, yes it will have an effect.  Your Debt/Income ratio will reflect the new loan.  After a couple of years, the income from the property will also be included in this ratio calculation.