General

Q.What are commercial loan closing costs?
A.The basic formula for commercial loan closing costs diverges from residential closing costs in two key areas:
appraisals and environmental inspections or insurance.
Commercial appraisals are more detailed and can cost up to several thousand dollars because the appraiser must
use several different methods to determine the value of a property.
Environmental inspections or insurance may be necessary for commercial loans and also may cost from several
hundred to several thousand dollars.
Other commercial closing costs are similar to a residential mortgage loan and may include lenders' fees, application fees, underwriting and document preparation charges, attorney's fees, survey, title insurance, escrows for insurance and taxes, etc.

Q. How long does it take to close a commercial loan?
A. Once you provide all the necessary documentation, including the appraisal, you could close a commercial loan in as little as 30-45 days.

Q. Underwriting rental properties?
A. Projected rent rolls often make sweeping assumptions about what might happen in the future if all goes perfectly according to plan. A buyer may see huge upside potential in a given property, assuming that deals can eventually be struck with low rent-paying tenants, but a lender will be acutely aware of the risk that any rent-regulated tenant(s) may not leave.

Q. Does United Commercial Mortgage do any deals with code violations regardless of whether they show on title or not?
A. If the appraisal or any other of the documentation points to it, all violations would have to be cured prior to funding the loan.

Q. Do brokers need to disclose the broker rebate? Is this a compliance issue?
A. Disclosure of a broker rebate is not required unless it is a mixed-use deal in a state that treats commercial like residential.

Q. Does a file need to be stacked in a particular order when submitting it to United Commercial Mortgage?
A. The file can be submitted in any order and will be stacked by a United Commercial Mortgage associate.

Commercial Programs

Q. Financing office/retail condo deals, where the developer hasn't sold the rest of the units?
A. Yes, as long as we can get comps/market info proving that the condo project is viable. Our lenders would finance the buyer of the individual condo from the original developer of the condo project.

Q. Would an auto parts retailer/distributor be acceptable if it is trade-in parts/machinery?
A. This would be acceptable; just confirm that there are no old tanks from a prior use.

Q. If there's a single structure property (e.g., one large apartment building, retail complex, office building), that encompasses multiple parcels, can United Commercial Mortgage do a loan?
A. Yes.

Income

Q. What property income qualifies?
A. All tenants must be in possession of their unit/space for leases to be acceptable and included in qualifying current income. Leases obtained by prospective buyer/borrower for tenants to take possession upon close of a purchase will not be considered in qualifying income. Rent increases will be considered in qualifying income if contractually scheduled to occur within 60 days of underwriting, a reasonable increase, and consistent with market.

Q. What is allowable income and what is our lenders position on rent spikes year-to-year?
A. Our partners model is to underwrite only "in-place" income. Only rents from either commercial or residential leases already in place are to be counted, period. If a borrower has signed leases, but tenants who have not yet moved in and paid rent,this income they are moving in tomorrow or if they have moved in and not paid rent. No exceptions won't count even if will be made; exceptions would be a serious violation of our lenders underwriting policy. Rents that show significant spikes year after year must be validated by other means in addition to the appraisal indication of market rent, rent roll, and borrower letter of explanation. These means may include, but aren't limited to, 4-6 months of bank statements, cancelled rents, and (if need be) tenant estoppels. If big increases in rents are validated by rent roll, market, and other means, but cannot be reasonably explained by increase in leasing, down units for renovation, increased rent, etc., underwriters use their discretion, including cutting back on income by averaging the historical with current.

Q. Who is the primary borrower when one borrower is self-employed and one is salaried?
A. The primary borrower is the borrower that earns the most income, our lenders always bases deals on the primary borrower.

Q. Who is eligible for the stated program?
A. Stated income only applies to self-employed borrowers and will be taken from the 1003. The income must be typical, customary, and reasonable for the borrower's employment or profession. Self-employed landscapers making $200,000 per year may be suspect and not reasonable. Our lenders do not verify the income unless it appears unreasonable.

Q. Tenants have a purchase option on the building they are leasing. They remodeled the offices right after they moved in and spent about $30,000 and have the receipts. Can these improvements be added to the value of the property even though they have occupied the property for less than a year?
A. The tenants' build-out is for their own use. The actual purchase price was already determined at inception of the lease, and the improvements may or may not add value depending on what they did. Our lenders takes the lesser of the appraised value or the predetermined purchase price.

Appraisal

Q. What is a FHLMC Form 71 B?
A. FHLMC (Federal Home Loan Mortgage Corporation, or Freddie Mac) Form 71B is an appraisal report format used in appraising income-producing residential property. Our lenders require this format be used if the loan amount is less than $1,000,000.

Q. What is a Complete Summary Narrative?
A. A Complete Summary Narrative is another type of appraisal report used for income/non-income-producing property that contains all three approaches to valuation: income, cost, and sales comparison, in a summarized format. A state-certified general appraiser also includes a narrative summarizing their reasoning and support for their conclusions. Our lenders require this format be used if the loan amount is greater than $1,000,000.

Q. How much do these appraisals cost?
A. A commercial appraisal can cost anywhere from $1000 to more than $4,000 depending upon the building type.

Q. Why do commercial property appraisals cost so much?
A. A residential property appraisal for an owner-occupied home usually only costs a couple of hundred dollars because the valuation is based primarily on the sale of comparable properties in the area. It is fairly easy to make adjustments to the value of one home to estimate the value of another. Commercial and income-producing properties, however, are not as easy to compare. There are vast differences in construction, design, materials, and functions that the property serves. The appraiser also must base the valuation on the income stream that the property is capable of generating and the replacement are more time-consuming and complicated, thus they can cost up to several thousand dollars. The price of appraisals is competitive and is set by the appraiser, not the lender or broker.

Credit

Q. What is the minimum credit score for United Commercial Mortgage's programs? Which score is used?
A. For Full doc programs, 660 FICO; for No doc programs, 620 FICO; for Stated income, 600 FICO (must be self-employed). The middle (mid) credit score of the highest wage earner or the person with the highest percentage of ownership, depending upon the situation.

Q. If the loan will be in the name of a business entity, whose credit score do our lenders use for determining the primary credit score?
A. The credit score of the person with the largest percentage of ownership or the largest wage earner score will be used,
based on the structure of company ownership. For situation specific answers, contact a United Commercial Mortgage Product Specialist.

Q. Collections, judgments, consumer credit counseling, and personal tax liens?
A. Subject to directives in the underwriting guidelines, our lenders look at the merits and mitigating factors of each loan on a case-by-case basis.

Q. Do our lenders accept outside credit reports?
A. No.

Q. Do our lenders report to the credit agencies?
A. Yes, they would report on the primary borrower and any guarantor associated with the loan.

Occupancy

Q. If a seller can produce new leases with higher rental rates than historical levels prior to our borrower/buyer taking possession, can our lenders use the new rental agreements as the going forward rental stream? Also, are there any restrictions with studio apartments?
A. Yes, our lenders can use new leases with higher rents as long they are not above current market rents. In addition, along with the new rental agreements you will need copies of the security deposit checks. Our lenders don't have restrictions against studio apartments, as long as there is a market for them. Please note: minimum square footage is 750, but exceptions can be made for the right mitigating factors.

Q. What is the minimum occupancy requirement?
A. 80%

Q. What is considered owner-occupied?
A. Regardless of the property type, if the owner either has an apartment or a business within the building, then it is considered owner-occupied. There are LTV restrictions for the loan depending on the size of space the owner will occupy.

Q. What are the guidelines for Section 8 renters?
A. Maximum guideline is 25% Section 8 occupancy.