Are you making the right application?

In the face of growing frustration dealing with underwriting requirements for commercial properties, one lender is finally sharing the secrets to overcoming difficult deals.

Moving from residential to commercial lending is often touted as the easiest and best option for investors wanting to increase their portfolio, but many are finding this not to be the case.

With brokers venting their frustration at dealing with underwriting requirements to get the deal over the line, one lender has shared a helpful list of tips for securing finance. “Canada’s apartment sector is underpinned to a large extent by loan insurance provided by Canada Mortgage and Housing Corporation (CMHC),” CMLS Financial wrote in its latest Commercial Mortgage Insights report, entitled “Seven Steps To A Successful CMHC Commercial Mortgage Application For Rental Properties”.

CMLS lays out the seven elements required in every commercial mortgage application.

1. CMHC application fee
This is an up-front fee of $150 per suite for any building that has 100 suites or less. The price is lowered to $100 per suite in excess of 100.

2. Property description and photographs
This includes the address of the property, the number of suites and a brief description of the property.

3. Rent roll
“A current rent roll is mandatory. It must show all suites, tenant names or vacant suites, suite type by bedroom count and base rent per month for each suite,” the report states. “In cases where uncertainty exists in vacancy or rent levels, it may be necessary to provide historic rent rolls.”

4. Financial statements
Three years’ worth of borrower financial statements is required.

5. Environmental report
CMHC will not lend on any property that does not meet sufficient environmental standard. The lender rep can advise brokers what exactly is needed for both phase one and phase two reports.

6. Sponsorship info
“All loans over 60 per cent of CMHC’s lending value must be supported by guarantees,” the report states. “CMHC requires an accurate description of the property’s ownership structure.”

7. Due diligence documents
These include a building condition or appraisal report, purchase documents, debt details, copies of the utility, tax and insurance bills, and property management contracts, among others.

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