First Time Commercial Lending

[Joshua Merchant]

Hey y'all, my wife and I are looking at our first commercial purchase (a five apartment building). The lender we're working with asked us for a pro forma mortgage. I've done this in residential, but I'm unfamiliar with the commercial process (terms, length, etc.) and have been told it can vary a bit more. Is there a typical set of terms and such in commercial I should be using?

[Brandon Plombon]

Hi @Joshua Merchant My guess they are wanting your proforma financials - what are your projections for the property. Typically commercial deals are for a 5 year term note which will balloon or have one large payment at the end and then will renew for another 5 year term and balloon again. When these loans renew you will have appraisal fees, title work, loan fees, ect. again. The standard amortization schedule is 20 or 25 years. Most lenders will also require 20-25% down payment leasing the property at 75-80% LTV. Those are the main differences as opposed to a fixed 30 year traditional mortgage