Differences between the Commercial Mortgage Origination ...
Differences between the Commercial Mortgage Origination process and the Residential Origination process
by Chris Santo, LendingApps
. csanto@
|Commercial Origination |Residential Origination |
|Broker's Role |Broker's Role |
|Collect Property Information: |Collect Borrower information: |
|2 yrs property operating statements |2 yrs tax returns |
|Current rent roll |Paystubs |
|Brief property description |3 mos. bank statements |
|Complete commercial loan app using commercial mortgage software |Complete 1003 using residential processing software |
|that: |Calculate Debt-to-income Ratios (front / back) |
|Normalizes the property's inc / exp and adjusts for inflation |Pull credit, review FICO |
|Applies the appropriate underwritten reserves |Determine the lender and loan program, stacking order |
|Calculates the stabilized NCF |Submit for prelim. / Clear conditions |
|Estimates value and calculates the LTV and DSCR |Float / lock loan |
|Supports your derivation of NCF in the Executive Summary |Order services: |
|Submit to lenders in a professional and credible package |Appraisal |
|Receive final term sheet and get signature |Escrow / Title |
|Close and fund loan |Flood cert. |
|Lender's Role |Submit for final underwriting |
|Review NCF, LTV and DSCR |Order docs |
|Prepare / Send quote to broker |Close and fund loan |
|Order services: |Lender's Role |
|Appraisal |Review 1003, credit |
|Environmental (if req.) |Validation / Clear conditions |
|Engineering (if req.) |Final underwriting / Draw docs |
|Escrow / Title |Signed doc review |
|UCC |Close and fund loan |
|Principal credit | |
|Close and fund loan | |
The main difference you will find is that on the commercial side, the broker has to spend much more time understanding the rental income and the operating expenses in order to put together a loan request for a commercial mortgage lender.
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