Commercial Mortgage

Manual

Liberty

Mortgage

Michael Shapiro
773-677-6460 financing.information@comcast,net

Table Of Contents

SBA Program 504

/

Page 1

SBA Program 7(A)

/ Page 2

SBA Required Documentation

/ Page 3-4

FHA Program 223 (F)

/ Page 5

FHA Required Documentation

/ Page 6-7

100% FHA 203(k) Loan

/ Page 8

100% Rehab Loan Documentation

80% Conventional Mortgage

/ Page 9
Page 10

SBA 504 Loan

Eligible Use of

/

The CDC/504 loan program provides for economic development .

Proceeds:

/

The 504 Program provides small businesses financing for “brick

and mortar” It can be used to:

Acquire Equipment

Acquire Fixed Assets

Construction of new facilities

Refinance or acquire commercial real estate

Modernizing, renovating or converting existing facilities

Ineligible Use of

/

Can not be used for:

Proceeds:

/

Working capital

Inventory

Business acquisitions.

Maximum LTV:

/

90%

Maximum Loan:

/

5,000,000.00

Interest Rate:

/

Established by lender by a margin added to the cost of funds.

Program Options:

/

Interest rate options include variable, one (1), two (2), three (3),

four (4), and five (5) year fixed rate options.

Amortization:

/

30 Years

Underwriting:

/

Minimum FICO of 650

Personal guarantee is required

1.10% Minimum Debt Coverage Ratio

Processing may take between 45 to 89 days

Prior Ownership and Management Experience

Applicants net worth must be less than $15.000.000.

The subject property must be occupied by a minimum of 51% by the Small business Concern (60% for new construction).

Page 1

SBA 7(A) Loan

Eligible Use of

/

The 7(A) Is SBA most popular loan program for businesses .

Proceeds:

/

It provides help for businesses with special requirements:

  • Provide long-term working capital to use to pay operational expenses, accounts payable and/or to purchase inventory
  • Short-term working capital needs
  • To refinance existing business debt, under certain conditions
  • To establish a new business or assist in the acquisition, operation or expansion of an existing business
  • Revolving funds based on the value of existing inventory and receivables, under special conditions
  • To purchase, construct or renovate real estate properties.

Ineligible Use of

/

Can not be used for:

Proceeds:

/

To reimburse owners for the money that they previously invested in their business.

To affect a partial change of business ownership.

Buying an asset and hold its potential increased value.

To repay delinquent state or federal withholding taxes or other funds that may be held in escrow.

Maximum LTV:

/

90%

Maximum Loan:

/

5,000,000.00

Interest Rate:

/

Established by lender by a margin added to the cost of funds.

Program Options:

/

Interest only payments are allowed initially on new loans.

Amortization:

/

25 years for real estate

10 years for equipment

7 years for working capital

Underwriting:

/

Minimum FICO of 650

Personal guarantee is required

1.1x Minimum Debt Coverage Ratio

Processing may take between 45 to 89 days

Prior Ownership and Management Experience

Applicants net worth must be less than $15.000.000.

The subject property must be occupied by a minimum of 51%

by the Small business Concern (60% for new construction).

Page 2

SBA Required Loan Documentation
Loan Application Form 1919 and personal background information
  • Previous address

  • Previous name used

  • Criminal record

  • Educational background check

  • Fill out SBA form 912

  • Fill out form 413

Ownership And Affiliations
Include a list of names and addresses of any subsidiaries and affiliates, including
concerns in which you hold a controlling interest and other concerns that may be
affiliated by stock ownership, franchise, proposed merger or otherwise with you.
If you are purchasing a current business you will need
  • Current balance sheet and P&Lstatement of business to be purchased

  • Previous two years federal tax returns

  • Proposed bill of sale including terms of sale

  • Asking price with schedule of inventory, machinery and equipment, furniture

and fixtures
Resumes
Some lenders require evidence of management or business experience, particularly
for loans that are intended to be used to start a new business.
Business Plan
All loan programs require a sound business plan to be submitted with the loan
application. The business plan should include a complete set of projected financial
statements, including profit and loss, cash flow and a balance sheet.
Personal Credit Report
Your lender will obtain your personal credit report as part of the application process.
However, you should obtain a credit report from all three major consumer credit rating
agencies before submitting a loan application to the lender. Inaccuracies and
blemishes on your credit report can hurt your chances of getting a loan approved. It’s
Critical for you to clear these up before beginning the application process.
Business Certificate/License
Your original business license or certificate of doing business. If your business is a
Corporation, stamp your corporate seal on the SBA loan application.
Business Credit Report
If you are already in business, you should be prepared to submit a credit report for
your business. As with the personal credit report, it is important to review your
business credit report before beginning the application process.
Page 3
Income Tax Returns
Most loan programs require applicants to submit personal and business income tax
Returns for theprevious 3 years.
Financial Statements
Many loan programs require owners with more than a 20 percent stake in your
business to submit signed personal financial statements. You may also be required to
provide projected financial statements either as part of, or separate from, your
business plan. It is a good idea to have these prepared and ready in case a program
for which you are applying requires these documents to be submitted individually
Profit & Loss Statements
This must be current within 90 days of your application. Also include supplementary
Schedules from the last three fiscal years
Bank Statements
Many loan programs require one year of personal and business bank statements to be
Submitted as part of a loan package
Collateral
Collateral requirements vary greatly. Some loan programs do not require collateral. Loans involving higher risk factors for default require substantial collateral. Strong business plans and financial statements can help you avoid putting up collateral. In any case, it is a good idea to prepare a collateral document that describes cost/value of personal or business property that will be used to secure a loan.
Legal Documents
Depending on a loan’s specific requirements, your lender may require you to submit one or more legal documents. Make sure you have the following items in order, if applicable: Business licenses and registrations required for you to conduct business Articles of Incorporation Copies of contracts you have with any third parties Franchise agreements Commercial leases
Page 4

FHA 223(F)Loan

Eligible Use of

/

The FHA 223(F)is for residential properties 5 units and up.

Proceeds:

/

This program allows for commercial use up to 25% of the building.

Each unit must have a complete kitchens and Baths

  • The program allows for non-critical repairs up to 6,500.00 per unit and must be completed within 12 months of loan closing
  • All persons are eligible to occupy such projects subject to normal occupancy restrictions.

Ineligible Use of

Proceeds:

/
  • Major repairs

Eligible Borrowers:

/

LLC

Individuals

Partnerships

Corporations

Public Bodies

Cooperatives

Income Ratios:

/

1.20%

Maximum LTV:

/

83.3% of the FHA appraised value

Maximum Loan:

/

Section 207 statutory per unit limits

Interest Rate:

/

Fixed rates.

Amortization:

/

35 years

Loan is assumable

Underwriting:

/

It’s non-recourse

Secondary financing is permissible

3% Application Fee is payable to HUD at time of application.

Page 5

FHA 223F Loan Check List
Requirements For A Preliminary Review
  • Property name

  • Property address

  • Purchase price or contract

  • Financial statements for most recent year to date

  • Unit mix

  • Number of units

  • Number of bedrooms per unit

  • Number of bathrooms per unit

  • Most recent rent roll, or rent rate for each unit type

  • Year property was built and dated of any major rehab

Submission Package
Bio for each Key Principal as defined below:
  • Information regarding any involvement with a prior HUD MAP

or LEAN project
  • If so, include FHA Project numbers

Management company information:

  • Bio of Principles

  • Complexes managed a during previous 5 years along with number of

units per complex
  • Name of individual manager of subject property

Photographs of the subject property’s physical condition, existing and

proposed:

Unit mix

Year built

Parking Spaces

List of amenities

Total number of units

Site square feet or access

Certificate of Occupancy obtained

Financial Information:

  • Fiscal year-end financial statements and income
statements for the For the previous two years
  • List of proposed renovations during next 2 years, if any
  • The most recent year-to-date interim financial statement
  • Rent Rolls for the previous 6 months detailing occupancy

  • List of renovations completed within last 3 years, with cost per item

Page 6

Information regarding existing debt secured by property:

Lender name

Origination date

Maturity date

Original balance

Current balance

Interest rate

Amortization

Monthly payment

Escrow balances (if applicable)

Replacement reserves balance (if applicable)

Payment penalty (if applicable)

List Evidence of site control:

Deed

Contract

Option

List of green / sustainability features, if appropriate.

Notify CNB of any known environmental issues, including List Evidence

Notify CNB of any actual or potential risks that you are aware of associated

with the property or its location

If Commercial component is included:

  • Component information regarding potential tenants
  • Proposed square feet
  • Proposed rental rates

Key Principals are defined as follows:
  • All primary operating officers of entity

  • All stockholders with a 10% or more interest.

  • LLC: All members of a LLC with a 10% or more interest.

  • All general partners and limited partners with a 25% or more interest.

  • Any body that is relevant for any individual or entity through three tiers of ownership

Page 7

FHA 203K Rehab Loan

Before After

Purpose: /
  • Acquisition and rehab of 1-4 Unit owner occupied
  • property No maximum repair amount
  • Up to 6% Seller contributions allowed

Includes: /
  • Rehab costs
  • Closing costs
  • Acquisition costs
  • A 10% construction reserve
  • A six month mortgage payment reserve

LTV:

/

96.50% for a purchase

97.75% for a refinance

Term: /

30 years

Interest Rate: /

Residential fixed market interest rate

Maximum Loans:
(Illinois) /

1 Unit 365,700

2 Unit 468,250

3 Unit 565,900

4 Unit 703,250

Type of Property:
Residential & Commercial /

1 Story 75% residential 25% commercial

2Story 51% residential 49% commercial

3 Story 66% residential 33% commercial

The Rehab Money can only be used for the residential portion only

Required Documentation

Contract

2 years tax returns

2 months paystubs

2 months Bank statements

Contractor estimate of rehab costs

Page 8

100% Rehab Loan

Purpose: / Acquisition of 1-4 Unit non-owner occupied
Includes: / Closing costs
Rehab costs

Acquisition costs

LTV: /

100% Purchase, but it must appraise at 70&% LTV

After completion

Term: /

9 Months

Interest Rate: /

9.50%

Cmments: /

It cost a lot of money but you have NO investment.

Required Documentation: /

Contract

2 years tax returns

2 months paystubs

Estimated closing costs

Contractor estimate of rehab costs

Page 9

Purpose: / Acquisition of 1-4 Unit non-owner occupied
Includes: / Closing costs
Rehab costs
Acquisition costs
LTV: / 100% Purchase, but it must appraise at 70&% LTV
After completion
Term: / 9 Months
Interest Rate: / 9.50%