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Glossary of Underwriters’ Terms
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Operating statement: Financial statement that provides a sound understanding of the financial statement used to calculate net operating income
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Tenant contributions: Contributions made by a commercial property’s tenants,
including expenses associated with utilities such as electricity, gas and water
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Vacancy factor: A measure that underwriters place on buildings to account for the
potential turnover of tenants
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Some full-documentation programs allow the use of discretionary income to supplement NOI in the DSCR calculation. These loan programs usually use a risk model that includes a debt-to-income calculation that is similar to the one used in residential lending.
Stated-income loan programs usually will allow a lower DSCR. In many cases, an approval is attainable even if the property is losing money on paper.
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The accurate submission of operating statements will greatly increase the number of loan approvals that loan officers and brokers receive. Understanding how and why underwriters analyze financial statements is a great advantage for those who want their loans to close.
Randy Renken is
an account executive for New World Commercial Lender. He earned his master's degree in business administration from Texas State University, San Marcos, in 1989. Renken has 17 years' experience in residential and commercial lending. Contact him at (866) 448-6300, ext. 200.
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