How is qualifying figured for commercial financing on an office building? Rental income from the building?

Answer 1

Lending criteria for CRE:

1/ Loan to fair market value of collateral..basically, the bank should not be exposed in a liquidation scenario. Also type and condition of collateral

2/ Cash flow of the collateral if leased for rental income should suppourt debt service. Net cash flow should be at least 1.20x (some banks use 1.3x) of debt. Other factors they look at are term of leases, renewal rents, vacanacy rates and operating expenses.

3/ Experience of the management/borrower....relevance of this criteria depends on size of project.

Answer 2

Rental Income and condition of the Building.