If you are self-employed, a new corporation or entity or simply took a loss on your personal or business taxes then you may find it difficult to get a commercial real estate loan approval – especially from conventional financial lenders. It sometimes seems that traditional lenders have an unspoken bias against the self-employed and new entities with less than 2 years in business, a company experiencing a bad year, or seasonal workers / businesses.
But there is one solution to this, and it is called a no-income verification mortgage. Now, let us explain about this mortgage first. Afterward, we will tell you about the property owners, corporations, businesses, and small to middle market real estate investors who need this financial product, and the different things to keep in mind before applying for a no-income verification mortgage in Florida and throughout the continental United States.
Navigating the no-income verification commercial lending landscape
A low- or no-income doc commercial loan lender will not demand documentations such as personal or businesses tax returns, pay-stubs, 1099's, k-1's, tax transcripts, and other personal or business related income docs. Generally, a commercial mortgage lender offers this financial product to those who are disqualified by banks and other traditional lending sources; the reasons for the disqualification majorly, include large losses displayed on the taxes, a lower taxable income, negative income, hard-to-verify or fluctuating incomes.
The business and self-employed lot, having an unstable income but strong credit, faces such problems. Applicants for a no-income verification commercial loan, however, have to cough up slightly larger down payments; ie, a substantial deposit through personal savings or equity in security typically 25-30% of the appraised value.
Who requires this loan?
Some groups find it hard to meet the strict requirements of a traditional lender. These groups include:
- New businesses
- Contracted personal
- Corporations or entities declaring a negative taxable income or larger losses than gains
- Seasonal workers
- New immigrants
What must be kept in mind before applying for this loan?
Slightly higher interest rates but competitive enough to allow your investment to create a positive cash flow on your investment
A no- or low-doc mortgage only requires asset based income and other related commercial real estate property documents, and that is why it is easier to qualify – but it generally carries slightly higher interest rates. The interest rates of a no-income verification loan mainly depend on lenders and your credit worthiness. A few lenders offer loans at discounted interest rates; the same figure an investor gets while securing a real estate investment loan traditionally.
Slightly larger deposits
Generally, every commercial lending institution requires a deposit of 25-30 percent; however, a few lenders may require smaller deposits.