To get a loan package through underwriting, understand what lenders want

Courtney Sapin, broker, Commercial Mortgage Broker Services

As published in Scotsman Guide's Commercial Edition, January 2010.

Many mortgage brokers consider owner-user loans to be the simplest loans for which they can qualify borrowers.

In addition, banks that prefer these loans often like them because they can be made for almost any type of business and because the business depends on the real estate it occupies, which means less risk.

As a broker, it can seem as though all it takes for a solid owner-user deal is a client occupying at least 50 percent of a building's space. But there's more to it than that.

To find funding for these clients, commercial mortgage brokers must know what lenders look for in these borrowers and what to ask for when preparing a loan request.

Here are some tips for tackling these deals.

Know the borrower

Banks and some institutional lenders typically like owner-user borrowers, which are typically defined as business-owners who own the property in which their business is located and occupy at least half of the subject property.

Some of these owners may rent out a portion of their property, as well, which creates an additional income stream to support the proposed debt.

Owner-user loans are available for nearly every property type, including special-purpose properties, offices, industrial or warehouse facilities, commercial condominiums, and retail stores.

Borrowers for these loans can include a range of businesses, from retailers, wholesalers, manufacturers and distributors to gas stations, doctors, veterinarians, dentists and other service-providers.

Each property and borrower type has distinct needs. These loans generally carry a lower interest rate and higher loan-to-value (LTV) ratios than other loan types, however.

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