When home values and prices remain high, the demand for rental properties like apartments and multifamily housing is strong. Given the strength of this sector in the commercial mortgage market, brokers are likely to come across borrowers seeking finance for these properties.

Here’s what you need to know when your borrower need to obtain a small-balance commercial mortgage for an apartment or multifamily property:

The credit report:

You’re borrower’s credit report is an important piece of the puzzle, as it’s a tool lenders use when evaluating a commercial mortgage request. A tri-merge credit report is generally preferred, but as long as there is at least one score and tradelines detailing your borrower’s credit history, a small-balance commercial mortgage lender should be able to use it in the initial review of the loan scenario. Ask your borrower about any past financial obstacles before submitting so that you’re prepared to discuss them with the lender.

The collateral:

The building your borrower plans to pledge as collateral is also a crucial factor for a commercial lender. Before submitting a deal, make sure you know where your borrower’s apartment property is located, the size of the building, how many tenants it’s able to house, the occupancy and vacancy rates and any other relevant information. A picture is worth a thousand words, so providing exterior and interior photos of the property is strongly encouraged.

The use of proceeds:

In order to fully understand and evaluate a commercial mortgage request, a small-balance commercial mortgage lender will need to know how your borrower plans to use the money. Whether it’s to purchase another apartment building, make improvements to an existing structure or pay off debt, include the reason your borrower is seeking financing in the summary of the deal.

The capacity to pay:

Your borrower’s ability to make their monthly payments is going to be important to any commercial lender. Provide your lender will all relevant financial information, such as a 1003, personal financial statement, rent roll and income and expense reports. These will show that the income your borrower generates from the apartment building will be able to support the loan.

Getting the above information squared away with your borrower before submitting the deal to a small-balance commercial mortgage lender is a great first step toward obtaining financing.  A thorough knowledge of your borrower’s credit, collateral, use of funds and capacity to repay the loan is the best way to facilitate the lending process and get your borrower the loan they need fast.

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