Apartment Building Loans
I specialize in Apartment Building Loans. Apartment Building Loans fall in the commercial loans category and are very popular in today’s market. Most apartment building mortgage lenders want the borrower to put a 20% down payment while others require 25% down payment. The lower the loan to value the better the mortgage rates. There are two different types of apartment building mortgage loans. The first is a portfolio apartment building mortgage lender and the second is a FANNIE MAE apartment building mortgage loan. Both have its advantages and disadvantages.
Requirements For Apartment Building Loans
Apartment building mortgage loans lenders are more concerned with the subject apartment building than the credit of the borrower. The financial profile of the mortgage loan borrower is very important because the lender wants to know that the owner is capable in managing and operating the apartment building. They want to make sure that the apartment building has a history of generating income and that there are no obstacles in renting units. The following are what is required for apartment building mortgage loans:
- Operating statements from the past to years and year to date operating statements.
- Current rent roll and historical rent rolls for the past 12 months.
- Pictures of the property. Both interior and exterior photos.
- Borrower’s net worth and credit profile.
- Borrower’s liquidity.
- Borrower’s recurring cash flow
- 3 years of borrower’s personal and business tax returns.
- Personal financial statement of the borrower.
Prepayment Penalty On Apartment Building Loans
With apartment building loans, there are prepayment penalties. The most common type of prepayment penalties with apartment building mortgage portfolio lenders are the 5, 4, 3, 2, 1. What this means is that if you pay off your mortgage balance the first year, the lender will charge you a 5% prepayment penalty. If you pay off the mortgage balance the second year, the prepayment will be 4% of the mortgage balance. 3% prepayment penalty on year 3, 2% prepayment penalty on year 4. and 1% prepayment penalty on year 5.
With FANNIE MAE apartment building mortgage loans, the lender will charge you the yield maintenance premium which is the whole amount of interest that you would have paid until your apartment building mortgage loan matures. For example, if you had a 5 year ballon apartment building mortgage loan and you were going to sell the apartment building after 6 months of getting the mortgage loan, you would be liable for 4 years and six months worth of interest payments. However, these loans are assumeable and a buyer can assume your current FANNIE MAE loan as long as they qualify.