A commercial loan is written and qualified based on the net operating income of a business or amount of income a property produces. This makes it very different from a residential loan which is written and qualified based on the personal income of the borrower. However commercial loans do take the borrower’s personal income information and strength into consideration, but the amount of the loan directly relates to the amount of income the business or property produces. Lenders may use many different ratios and criteria to underwrite each application, but generally, the amount of income the business or property produces will determine the amount of money a commercial lender is willing to lend.
There are a number of properties that can be classified as commercial properties. It is important to identify exactly what type of property that is to be financed. Residential real estate can be financed under a commercial mortgage if it is purchased as an investment property. This can fall into one of three categories as follows;
- Pure residential, 1-4 units
- Multifamily or pure residential, 5 or more units
- Mixed Use residential/commercial
A number of other properties are included when considering a commercial mortgage. Examples are an office, retail or industrial property.
Please call us for a free no obligation, no hassle evaluation of your commercial mortgage needs