Commercial Multifamily Apartment Loan Application Process

 

Commercial Multifamily Apartment Loan Application Process

Preparing the required documentation needed for the multifamily loan application process can make a big difference in the speed and efficiency of closing your transaction.  There are several items that nearly all lenders will request. 

Real Estate Investors should keep their resumes current and reflect the experience and number of projects and units that they have been involved in.  Investors should detail new construction projects that they have previous completed, number of multifamily apartments they currently own or manage.  The resume should summarize your real estate investment experience.

Some lenders may require a third-party management company to be used in the first year of operations with investors with that have less experience.  Lenders require personal financial statements for key principals in the transaction, if the entity is a for-profit organization.  The assets and liabilities of the principal needs to be itemized to produce a net worth. Lenders are looking for liquid assets that can be verified for the amount the borrower needs to bring in equity for the transaction. The lender also requires an amount of liquidity in the event that the property loses occupancy, income, or expenses increase so that the borrower can make debt service payments.

What is an SREO - Schedule of Real Estate Owned?

An SREO (Schedule of Real Estate Owned) is required from investors in order for the underwriter to see a snapshot of the projects that are included in the portfolio. Also, it provides the lender with the number of projects, units, ownership percentage, as well as the equity and maturity dates of the current loans.  Most multifamily apartments are set up as single asset entities, and the mortgages do not reflect on a personal credit report as do residential loans. If you build your own SREO, be sure to include:

  1. The property name, address, city, state, and zip code.
  2. The property type, number of units, your percentage of ownership
  3. The acquisition date, purchase price, debt balance, loan maturity, interest rate, current value, equity, monthly cash flow, and lender name
  4. Have a current mortgage statement on the multifamily property reflecting the current balance, reserves, monthly payment, and interest rate. I have created a list of the most essential items needed to begin.  Each lender may require a few additional items as well.

Interested in obtaining a detailed estimated FHA quote you will need to submit the following documentation:

  • 3 Years of Annual Operating Statements
  • Trailing 12 Month Operating Statement
  • Current Rent Roll/Occupancy Report (with move-in and lease-end dates)
  • Interior/Exterior Photos of the Property (or property website)
  • Personal Financial Statement (including a schedule of real estate owned)
  • Real Estate Resume
  • Management Company Resume
  • Current Mortgage Statement

If the quote you obtain is acceptable, then most lenders will request the following items:

  • Copy of Current Note
  • Organizational Chart of Borrowing Entity (including EINs)
  • Organizational Chart for Management Agent
  • Property Photos (including Amenities)
  • Monthly Occupancy for Last 3 Years and YTD
  • Real Estate Resumes for Key Principals and Management Company (including previous HUD experience for key principals, i.e. years of experience, number of properties, number of units, etc.)
  • REO and Debt Schedule for Key Principals
  • Site Plan, Survey, Engineering Survey, or Marketing Site Plan (if available)
  • Current Rent Roll (including: unit ID, unit type, asking rent, contract rent, move-in date, lease start date and lease end date)
  • Breakout of Units (by market rate, tax credit, Section 8, HAP or other orientation variable, if HAP contact is in place)
  • Unit Mix (with # of units, units sizes and floor plans)
  • Purchase Agreement, including all amendments (if purchase) or Existing Title/Deed (if refinance)
  • Previous 3rd Party Reports (if available)

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