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FAQ's - Frequently Asked Questions
1. What differentiates a commercial mortgage from a residential mortgage? A residential mortgage is limited to as the name implies, “residential properties” no greater than four units per building, whereas, a commercial mortgage is utilized to secure financing for a wide-array of property types. In addition, the residential loan process is essentially standardized through the use of guidelines established by Freddie Mac and Fannie Mae, while the commercial loan process can vary greatly from lender-to-lender. Every commercial lender requires that the applicant have minimum 20% equity in the property. This translates into a Loan-to-Value (LTV) that is no higher than 80%. There are exceptions to this rule when two separate properties can be cross-collateralized. 3. In what states does The Chicago Commercial Mortgage Group do business?The Chicago Commercial Mortgage Group has the ability to finance deals in all 50 states. However, the majority of our deals involve properties located in the Great Lakes region (Illinois, Wisconsin, Indiana, Ohio and Michigan). 4. How long does the loan process usually take?The typical residential mortgage takes around 45 days to close while the commercial loan process is more complicated and usually takes around 60 days from start to finish. 5. What type of information will I need to provide The Chicago Commercial Mortgage Group with to ensure that the loan process runs smoothly and efficiently?Although each lender requires different types of specific information all lenders will want to see:
The Chicago Commercial Mortgage Group is able to provide the lowest rates available because it has a larger network of commercial lenders to work with than its competitors. Our lenders vary from publicly owned banks, to privately held investment groups. As a result, The Chicago Commercial Mortgage Group is able to find the right lender with the lowest rate for virtually any commercial property. 7. Is debt service coverage important for the approval of the commercial loan?Yes, it is one of the key factors as to whether a commercial loan is approved. Debt service coverage is the ratio of cash available (after all property expenses) for loan payments to the loan payment. Expressed as: Net Operating Income (NOI) / Principal and Interest on proposed mortgage. Most commercial Lenders require a DSCR of 1.20:1 or higher for most property types. 8. Is there a penalty if I pay off a loan before its term?Most commercial loans have what is called a “Pre-pay Penalty.” This is a penalty assessed if a loan is paid off in full or prior to the Term outlined in the loan documents. Commercial loans often carry a prepayment penalty for four of the first five years or a five year product. It is of the utmost importance to inquire about these penalties because if invoked they can be quite costly.
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©2003 The Chicago Commercial Mortgage Group Site designed by Steven Tazic and maintained by VPIC, Inc. |
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