Diffrences between Commercial v. Non Commercial Loans

Curious as to the diffrences between commerical loans v. non-commerical loans - specifically:

  1. Qualification criteria
  2. Amount required to put down
  3. Rates and interest
  4. Max & Min number of units
  5. If rents are considered in underwriting the loan

Anything else that you feel would help a novice…

I am trying to figure out whether or not a 3 family or a 5 family would be a better option for a first invesment property. The 5 generates a much greater cash flow…but cost 2x the 3 family.

  1. Qualification criteria is similar to resedential but slightly different. You still have to look dti’s and also ltvs and assets. But more emphasis is place on the actual property and the occupancies on the units.
  2. Usually commercial ltv’s do not go as high as residential ltvs but it’s also fico driven.
  3. Commercial rates are usually higher than residential. Even someone with great credit is usually looking in the area 0f 7-10 %, once again it also depends on fico scores and other factors.
  4. Commercial is considered 5+ units
  5. and occupancy of units is considered in the underwriting process.

With the 3 family you will have access to some much better looking rates because it is classified as a residential, taking into consideration also fico score and how much you are willing to put down. If you are looking to put 20% down on a three family you should have many options at your disposal.