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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   November 2006

Don’t Forget the ‘5 Ws’

In your executive summary, tell lenders what, where, who when and why

The foundation of a complete, solid loan package starts with the executive loan summary. An executive summary is your calling card. Do it well and lenders will recognize you as a professional who deserves their best effort.

An excellent blueprint to follow in creating your executive summary is the “five Ws” model. It dictates that you must answer “what,” “where,” “who,” “when” and “why” in every story. Your executive summary should present these essential facts concisely, enabling a lender to respond in a few minutes with a yes or no answer.


“What?” is actually the easiest question to answer. Is it a purchase or a refinance? Is it a construction loan, a rehab loan, a bridge loan or another structure? Some brokers submit loan packages that don’t explain what the applicant wants. This makes it tough for the lender to take the next step.

Remember, income-property lenders qualify the property first. Include the property’s income and expense history.

Because no loan is perfect, you also should mention any significant negative aspects of the transaction. Don’t leave it to your prospective lender to discover them down the road. If you bought a used car with a bad transmission, it wouldn’t take you long to figure out something was wrong. Wouldn’t you prefer to know right away so you can adjust your purchase price accordingly?

This is your opportunity to present the mitigating factors that will help your lender adjust for these issues.

Finally, do the property or the borrowers have special characteristics that need to be mentioned? For example, is your borrower a retired applicant with considerable successful real estate experience and several assets but a modest annual income? Or are you representing a group of investors who are targeting a new market area or a new collateral type? The lender must know.


Be sure to describe the subject property’s city and state as well as its neighborhood. Further, mention what is happening in the subject property’s submarket as well as in nearby markets.

Although you aren’t expected to share the property’s address in the executive summary (particularly on a refinance transaction), you will need to supply general location information — urban or suburban, population, etc.


Different lenders weigh the borrowers’ history differently. How they weigh this factor will depend on the specifics of the individual transaction, the loan programs they are emphasizing and their underwriting guidelines.

Regardless of how much weight the lender places on the experience of the applicants, it is important to be thorough in providing this information in the executive summary. Tell the target lender about the applicant’s income-property experience, credit history, financial assets and income level.

At this stage in the loan-application process, your applicant summary can be relatively brief. The lender will have plenty of opportunity down the road to go into this in more detail.

When and why

Chances are your clients came to you with specific financing requirements, especially regarding a dollar target for the loan. Additional terms and conditions that may be important, such as the length of the loan term or the prepayment period, may also be crucial considerations for your clients. It is, therefore, important to have a clear hierarchy of your clients’ wants and needs.

If your client is concerned with prepayment provisions, then an adjustable-rate mortgage probably will be a better fit than a loan with a long-term fixed rate. If the loan size is crucial, perhaps your client should consider paying a lender fee to reduce the rate.

You should present a brief financial outline of the loan. For example, if the proposed loan is a refinance, when did your clients purchase the property and how much did they pay for it? If there is an existing mortgage, what is the outstanding loan balance?

Often, applicants (particularly developers) want to talk about prospective or future property value. Lenders want to talk about cash in the deal. If it is a purchase, what is the purchase price and how large is your client’s proposed down payment?

All these details will ultimately explain to lenders why they should consider your client’s deal.

Additional details

For more-complex transactions, such as construction or bridge loans, you should include information about the general contractor, the status of plans and permits, the marketing study, borrower cash and equity levels, and similar information.

You should not make a lender guess about a deal’s particulars. Present the facts. On complex loans, there is nothing wrong with contacting the lender at the start and simply asking for guidance. Some lenders have loan-application-package checklist that outlines what they need to get started.

Your executive summary also should be two pages or three, at the most. Think of it as your deal’s résumé — a neat, professional summary consisting of one or two paragraphs on each major deal point. Clear property photographs are often helpful, and a location map makes an informative addition, as well.

Experienced, successful brokers of income-property loans don’t reinvent the wheel each time they prepare an executive loan summary. They have a proven template to reuse for each type of loan, just as lenders have a template to respond to brokers’ inquiries.

How does a broker know that the template is a good one? Because the loan they presented using that template was funded.

•  •  •

Before you can explain the transaction, you’ve got to know it well. Don’t spend a lot of time on a deal your client has only briefly sketched out to you. If your client isn’t willing to spend the time upfront to explain what they are looking for, you are not well-positioned for success in selling it.



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