Four Ratios

1. Much of commercial mortgage underwriting can be boiled down to the results of just four financial ratios:

1. 1.  Debt service coverage ratio: Does the property generate enough net rental income to make the payments, and is there a safety cushion?

1. 2.  Loan-to-value-ratio:  If the lender is forced to foreclose, will the lender be able to sell the property for more than what it is owed?
2. 3.  Net-worth-to-loan-size ratio:  Is the combined net worth of the principals behind the LLC at least as large as the loan amount?

4.  Loan-to-cost ratio:  On construction loans, is the developer contributing enough of his own money to ensure that he won't just disappear when problems inevitably arise?

We'll look at each of these ratios in more depth in the pages that follow.

If you are ready to apply for your commercial loan, please return to our home page and begin inputting your commercial mortgage mini-app.

Are you an accredited investor?  If so, where are you investing your IRA?  Investors are earning 11% to 13% interest in first mortgage investments.