No Income Commercial Mortgage Limitations

There has been a significant difference in commercial real estate financing for people who want a stated income commercial mortgage. Similar to the residential market, there are more limitations, terms and conditions for financing when it comes to underwriting a stated income commercial loan. The market is drying up when it comes to providing no tax returns or IRS form 4506, and stating your income.

Lenders seem to follow the lead of larger institutions which implement tougher guidelines and underwriting. Especially, when there is an increase in foreclosures which is the case in the residential real estate industry. Currently, some prominent large lenders who offered stated income for commercial properties has left that side of the market. Of the few programs left, it is available for conservative investments such as residential income properties or apartment buildings. Although it is available, it is more restrictive with higher credit score requirements, and the borrower must demonstrate to have experience in managing these types of properties.

A major figure the lenders will want to see is the current income the property generates on stated income and full documentation loans. This number will not be overlooked and plays a significant role in getting approved for a certain loan amount. It is necessary for an appraisal. So, when applying for a commercial loan, always try to have the property financial records readily available. The lender will want to see the last two years income and expenses along with year to date figures. In addition, if you are requesting a business loan using full documentation, it will require you to provide the last two to three years of your personal and business tax returns. If your personal income is relatively low for your profession, do not worry, the emphasis is on the income derived from the subject property. The lender wants to make sure the property's income, (based on the property's tax returns and financial records) will pay for the mortgage payments not your personal income. Although, the lender does want to confirm that you have a sufficient amount in liquid reserves.

During times when lenders are more restrictive to commercial borrowers, it is very important to research and find solutions with a commercial mortgage company. There are many new and historic developments in the financial world as of late so it is best to regularly communicate your objectives with an informed commercial loan officer.