Conventional Conforming Commercial Mortgages
All borrowers want the best rates and lowest cost to finance their commercial mortgage property. Yet most borrowers do not qualify. With a Stated Non Conforming Commercial Mortgage many borrowers who otherwise could not qualify for financing are now able to.
Conventional loans require tax returns for the past two to three years to verify income and expenses. They require bank statements for the last two to three months to source and season down payment and reserves. Conventional loans generally require higher credit scores and years of experience owning and managing similar commercial property types. And Conventional financing takes much longer to close.
Stated Non Conforming Commercial Mortgages
For more lenient underwriting and quicker closing you may want to choose a Stated Commercial Mortgage. Though the rate may be higher many commercial real estate investors and small business owners will do better with this type of financing for many reasons.
First the lender generally does not require tax returns. This helps the borrower to truly qualify based on the income generated by the property. If it is a good investment and the property can service the debt and meet the minimum debt service coverage ratios the loan qualifies.
The Stated program does not require funds to be seasoned. They only require funds to be sourced. For conventional financing the funds must be seasoned for two to three months or longer. This requirement also helps many borrowers to qualify for the Non Conforming program.
Many Conventional lenders require a 680 FICO score. Some even require 700 or higher. Not only do they require the high FICO they also require years of experience owning or managing a similar property type. For an agency loan (FNMA, FHLMC, FHA, etc.) You must have if you want to purchase and finance a 12 unit property having owned only 1-4 unit properties would not help you to qualify. They may require you to pay for an experienced property manager to get their loan.
The average conventional commercial loans take 60 days to close. This is even longer for agency loans that can take 90 days or longer to fund. Yet, with the Stated Income program the loan closes in 2 to 4 weeks.
But maybe the most important reason to do a stated non conforming commercial mortgage is because they may be too small. Many conventional lenders will not finance loans under $500,000 or maybe even $250,000. The agency lenders require their loans to be at least $1,000,000 to $2,000,000. The minimum loan for the Stated Income program is $50,000.
There are many reasons to choose the Stated Non Conforming Commercial Real Estate Financing program. None of those reasons are because they offer better rates or terms than a conforming loan. Therefore, check with your conforming lender before choosing this program. If you work with a mortgage broker, they should know right off if you would qualify for the conforming program.