The documentation you will need to provide when for the underwriting of your commercial mortgage varies depending on the type of loan and the amount of capital you want to borrow up to $5M. In particular, the amount of documentation depends on whether you receive a full-doc, lite doc, or stated income loan. In general, the more documentation that you are willing to provide, the better terms you will be offered.
Traditional lenders require 3-5 years of financial statements, tax returns, and other documentation for a ‘fully documented and supported assessment’ (or ‘full doc loan’). Items may include
Bank statements & balance sheets
Asset statements & assessment notices
Original corporate documents & certificates
Personal financial records of the investors/operators
Business & personal
Payslips of borrowers and/or employees
Full doc loans are the most common form of commercial mortgages, and are the kind preferred by the majority of lenders in the InvestmentProperty.loans network. Pursuing a full doc loan may help you receive lower fees and interest rates, since they enable the lender to assess your risk factors and affordability at a higher degree than stated income loans.
Commercial lite doc loans require less supporting financial income documents than normal full doc loans. They still require some basic income verification, but the lender does not review the full financials of the potential borrower.
Lenders who offer lite doc commercial loans generally require an income declaration from the borrower, supported by an accountant’s letter confirming the income is a reasonable estimate of the borrower’s income. (Other documents may also be required.) A portion of lenders in the InvestmentProperty.loans network specialize in lite doc loans.
Stated income loan arrangements are sometimes available for owner-occupied investment property transactions. Stated income loans enable borrowers to receive loans even if they may not have the appropriate documentation of income for full- or lite-doc loans.
A stated income commercial mortgage can be obtained without the provision of personal or business tax returns to the lender. However, other documentation is still required: The commercial property must be able to demonstrate the ability to service the debt at a specific loan amount, and the investors or operators must demonstrate that they minimum financial capacity and credit requirements.
To understand those things, the lender may request documents like a year-to-date income statement, capital improvements summary (in the event the loan is for a renovation or rehab), or a number of other documents detailing property performance.