Investor Loans
Commercial property loans, or investor loans, are loans provided to real estate professionals like developers, investors, or corporations to invest in a property type designated for commercial use rather than residential. These types of properties are often used to develop storefronts, multi-family housing units, office complexes, warehouses, etc. Individuals utilizing commercial loans can finance the cost of the purchase, development, and construction of a commercial property.
Commercial (Investor) Loans
The qualifications for being approved for a commercial property loan are quite similar to a private individual applying for a residential loan. Since commercial loans are often granted to a business entity rather than a person, lenders will review the following factors of a business to qualify them for a commercial real estate loan:
The value of the property as it stands and its potential value following development—the loan-to-value ratio of the commercial property.
The creditworthiness of the business and the responsible party of the loan.
The financial strength of the business—reviewing three to five years of tax returns and bank statements.
Depending on the age of the business and its creditworthiness, lenders may require more financial documentation from the responsible party, using their individual information and finances to help the business get approved for the loan.
Commercial Loan Terms
Commercial loans are set up similarly to balloon payment loans and interest-only loans—a low monthly payment is required for a set number of years, then the remaining balance is due in full at the end of that period. Typically, commercial loans have a term of 5 to 20 years and may also have a higher interest rate than residential loans. This is because of the higher risk issuing a commercial loan can be—building a new store or multi-family residential complex only generates value if other people are interested in shopping or living at the complex.
Like a residential loan, it is also common for commercial loans to have additional fees. These fees are either wrapped into the loan amount or included as a part of the closing costs. As for paying the commercial property loan off early, it is inadvisable. Most commercial loans are issued with prepayment restrictions to protect lenders from losing potential yields on high-risk loans.
Like a residential loan, it is also common for commercial loans to have additional fees. These fees are either wrapped into the loan amount or included as a part of the closing costs. As for paying the commercial property loan off early, it is inadvisable. Most commercial loans are issued with prepayment restrictions to protect lenders from losing potential yields on high-risk loans.
Investor Stated Income Loans
Stated income loans are a variety of commercial property loans that are easier for investors to qualify for—simply by stating their income and meeting minimal requirements like having their employment verified and making a suitable down payment. Stated income loans can be used by investors to purchase a new commercial property or to refinance their property.
Stated income loans can be used for non-owner Single Family Resident (SFR), Condos, 2-4/5+ Units as well as commercially zoned properties. We offer these loans with a 3–5-year term with a fixed ARM and a 30-year amortization.
Stated income loans have a maximum loan-to-value ratio of 70%, so they do require a larger down payment than other commercial property loans. However, BlueGrey Mortgage can help investors qualify quickly and easily with:
Stated income loans can be used for non-owner Single Family Resident (SFR), Condos, 2-4/5+ Units as well as commercially zoned properties. We offer these loans with a 3–5-year term with a fixed ARM and a 30-year amortization.
Stated income loans have a maximum loan-to-value ratio of 70%, so they do require a larger down payment than other commercial property loans. However, BlueGrey Mortgage can help investors qualify quickly and easily with:
NO tax returns
NO 4506-T
NO Cash-out restrictions
NO Cash reserves required
NO limit on properties owned/financed
NO DTI calculation
NO Seasoned funds or asset disclosures (for purchases)
State income loans are a popular choice for investors who are:
Looking to increase the number of rentals they have.
Remodeling a home they plan to flip quickly.
Can’t pass on a viable investment opportunity but their cash reserve is low or tied up in other investments.
Wish to invest but still want some capital remaining.
Trying to grow their investment portfolio.
Vacation & Rental Property
Purchasing a vacation home or investing in rental property requires a slightly different approach than a home mortgage for your primary residence. With these personal and/or business investments there are different loan requirements because mortgage insurance is not available for loans on these purchases. As a result, borrowers will likely have to make a 20% down payment, pay all closing costs out-of-pocket (not rolled into the loan amount), and may have to meet more stringent financial and personal qualifications.
Some lenders or loan programs may require borrowers to have at least 2 years of property management experience if the borrower intends to use the potential rental income to help them qualify for the investment loan.
Second home and investment property loans typically have a higher interested rate.
Less opportunity for lower down payment.
In addition to differences in qualification, mortgage loans for rental properties and second homes also are restricted by the property type.
Eligible Property
Single Family Dwellings
Townhomes
Condos
Multi-Family Housing
Non-Eligible Property or Uses of Property
Time Shares
Co-ops
Select Manufactured Homes
Bed & Breakfasts
Interest Only Loans
Interest-only mortgage loans are exactly as they sound—the payments made, at least initially, are for the interest only and the loan program does not require a payment towards the principal balance to be made. This allows borrowers to maintain a smaller payment and is often favorited by borrowers in need of short-term lower payments.
Following the end of the interest-only period, the loan becomes fully amortized, meaning the payments are calculated so the loan can be paid off by the end of the loan term. This also means the new mortgage payment (now including the payment for the principal balance) will be significantly larger than the initial interest-only payments.
The longer the initial period of interest-only payments, the larger the new payment will be when that period ends. In fact, it is highly likely the new payment will be more than if you went a standard route of amortizing the payments from the onset of the loan—so why is this loan used?
Following the end of the interest-only period, the loan becomes fully amortized, meaning the payments are calculated so the loan can be paid off by the end of the loan term. This also means the new mortgage payment (now including the payment for the principal balance) will be significantly larger than the initial interest-only payments.
The longer the initial period of interest-only payments, the larger the new payment will be when that period ends. In fact, it is highly likely the new payment will be more than if you went a standard route of amortizing the payments from the onset of the loan—so why is this loan used?
The lower initial payment enables many potential homeowners to qualify for and afford a home loan. Once they are able to qualify and purchase the home, as the interest free period comes to a close, they refinance the loan to a traditional fixed-rate mortgage. While you may pay a little more interest overall, for many, it is how they are able to get into the home of their dreams.
Others using this loan are purchasing a property for investment purposes, paying as little as possible while repairs or upgrades are made or while looking for a renter, prospective partners, or buyers.
Construction companies may also obtain an interest-only loan to take advantage of the initial low payments while completing their build or renovations.
Interest-only loans may not seem economic because you may end up paying more over the course of 30 years than a traditional fixed-rate mortgage; however, if you invest more into your payments during that initial period, you may actually be able to pay off your loan sooner and close the interest cost gap between a traditional mortgage and your interest only mortgage.
Balloon Mortgage Loan for Investors
A balloon mortgage is a short-term loan that requires a lump sum repayment at the end of a specified loan period—usually five or seven years. Typically, a balloon mortgage will have a high, fixed interest rate during the set term and may or may not require a monthly payment to be made during the life of the loan. Sometimes, an interest-only payment is required during the loan term. Once the loan term has expired, the full balance borrowed plus interest is due immediately—or the borrower may be able to refinance the loan (including the interest accrued) under a different loan program.
Balloon mortgages are high risk for lenders because they do not require a steady monthly repayment and often have a higher interest rate than other loan programs. Qualifying for a balloon mortgage can also be more strict than other home loan programs. There are, however, no penalties for early payoff and balloon mortgages are eligible for refinancing at any time, not just when the loan balance is due.
Balloon mortgages are common for construction and real estate investors, where a loan is required to purchase or build on a property without any structure to serve as collateral. Once the construction company or investor sells the property, the funds are then used to pay off the balloon mortgage. Or, if a sale is not yet made, the balloon loan can be refinanced with the newly reformed property as collateral and the investor is able to obtain a more affordable payment schedule until a sale can be made.
Balloon mortgages are high risk for lenders because they do not require a steady monthly repayment and often have a higher interest rate than other loan programs. Qualifying for a balloon mortgage can also be more strict than other home loan programs. There are, however, no penalties for early payoff and balloon mortgages are eligible for refinancing at any time, not just when the loan balance is due.
Balloon mortgages are common for construction and real estate investors, where a loan is required to purchase or build on a property without any structure to serve as collateral. Once the construction company or investor sells the property, the funds are then used to pay off the balloon mortgage. Or, if a sale is not yet made, the balloon loan can be refinanced with the newly reformed property as collateral and the investor is able to obtain a more affordable payment schedule until a sale can be made.
Contact one of our loan officers to discuss your qualifications for a stated income loan or one of our other investor loans.