two loans one property
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[{"id": "g1cpqzi", "text": "It\u2019s not the same mortgage, the bank files a blanket deed of trust against your home, in second position behind your first mortgage.  This provides the bank some extra leverage in case you decide to walk away from the commercial property.\n\nBut by doing this they Can trigger some consumer disclosures, so we would avoid it at all costs.", "replies": [{"id": "g1cr3yv", "text": "Or, if you don't currently have a mortgage on your home, it would be one blanket 1st mortgage on both your home and your commercial property.  Either way, I would shop around for a better deal or maybe negotiate some additional recourse (maybe a principal guaranty) in lieu of a mortgage on your home.  If the issue is credit score rather than overall assets, this solution might work the lender.  Otherwise, keep on shopping for a loan.", "replies": [], "depth": 2}, {"id": "g1dh2mx", "text": "Thanks. We are trying to avoid it by putting down additional funds or boosting our credit scores. We noticed a few errors that we think will push it into the 800 range, which shouldn't be a problem from a lending perspective.", "replies": [{"id": "g1djnqm", "text": "It is odd that the bank is putting so much weight into your personal fico score. Does this bank do much commercial lending?", "replies": [{"id": "g1dknak", "text": "It is all they do.", "replies": [{"id": "g1dkx5y", "text": "Hmm, I was a commercial banker for a few years. Personal fico was a very low consideration because the investment property itself is the repayment source, not you personally.\n\nEvery bank has their own underwriting standards though.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "g1czkto", "text": "This is a rare occasion.  I've never seen this securing commercial r/E unless you werent putting the 25% down. \n\nThey also have to get you and your spouse to sign off, as IDOT's on residences are effectively useless without both parties consenting.", "replies": [{"id": "g1dgoar", "text": "I don't mind consenting, but I thought it was a little strange. We also offered to put addition funds down if that removed the 2nd mortgage. What I am wary of is the fact that this property is assessed well beyond what we are paying and if it ended up in the hands of the lender, they'd easily be able to sell at 2x to 3x what we are mortgaging.", "replies": [{"id": "g1e7jtq", "text": "That's not how it works.\n\nThe lender can only recover the pincipal amount of the loan and accrued interest unless you have a participation loan", "replies": [{"id": "g1e7n8s", "text": "How are you buying something 70% below market value, just curious", "replies": [], "depth": 4}, {"id": "g1fssk2", "text": "What does that mean? I am new to commercial lending.", "replies": [{"id": "g1j7kqa", "text": "A participation loan is where there is a loan payment and then the bank gets part of the appreciation of the price of the land as well as the payments.\n\nIt's not typical.\n\n\n\nOtherwise if you can't make payments and you own a property worth $1,000,000 and a mortgage if $500,000. The bank can foreclose on your mortgage but they can only recover what you owe them, nothing more.\n\nYou go to court. The court hires a realtor and maybe appraiser and they sell it at auction.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "g1d6i59", "text": "Sounds like a cross collateral / cross default taken as an abundance of caution scenario, happens all the time.\n\nOne loan can be secured by a 1st Deed of Trust on the investment property and either a 1st or 2nd Deed of Trust (depending on if you have an existing mortgage) on your home.", "replies": [{"id": "g1dgfjx", "text": "Thank you. I understand better and realize I have some work to do to make this a more conventional process.", "replies": [{"id": "g1djbsf", "text": "You\u2019re very welcome. Try to negotiate to release the lien on your house subject to a higher credit score after 12 months or however long you think it will take to bump it up to their minimum standards.", "replies": [{"id": "g1dks5g", "text": "Good idea. I anticipate within 6 months, the property value will be substantially higher than what is currently is and we will have paid off a large chunk of the loan. I can't imagine why they wouldn't be willing to release the 2nd mortgage after that.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "g1dzc6x", "text": "20%-25% can be quite high, especially with ultra low cap rates.\n\nThe banks are looking at the property's effective gross income, current and expected vacancy and the mortgage payment as key lending criteria. (Capacity to pay)\n\nThey are also looking at your credit score (Character). The Bank will also be looking at your 20% down (Collateral) along with your other assets (capital).\n\nIf one side isn't looking to good they go looking for more security, is your house as additional collateral.", "replies": [{"id": "g1fsyzk", "text": "That makes sense. However, why aren't the buildings on the property collateral? We already have a tenant lined up that will cover the entire cost of the mortgage. I guess it seems like the lender is laying heavily on the credit score about the gross income, vacancy, etc.", "replies": [{"id": "g1i71th", "text": "You have collateral, but what about other assets. At times real estate investments require unexpected additional cash injections and liquidity, and we are in a period of tremendous headwind.\n\nIf you are lucky enough to be financing a property that is occupied and where tenants are current on their rent prevents, that is wonderful, but understand things change quickly and the bank needs to make sure you can weather a storm.\n\nAlthough you have collateral, do you have others assets like stocks and bonds or access to capital through lines of credit? (Unsecured CAPITAL) if not, the bank is looking to secure against your house.\n\nI'm not saying it's right or even your situation, but you could consider reviewing with a real estate attorney or other professional to provide the advice that matches your particular circumstance.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "g1euiad", "text": "Can I ask the loan amount and the property type?   There may be other options.", "replies": [{"id": "g1fsroz", "text": "$115,000 Commercial/Residential. We plan to rehab the commercial front and build a small residential home too. Currently assessed values $330-$480 depending on where you look. Compos are in the same range.", "replies": [], "depth": 2}], "depth": 1}]