LOAN PROGRAMS
ABOUT
CONVENTIONAL
A conventional loan is a form of debt financing that can be used to acquire or refinance all commercial property types including, but not limited to: multifamily, hospitality, office, industrial, retail, mixed-use, and self storage.
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Conventional loans are usually funded by traditional financial institutions such as commercial and investment banks, credit unions, and savings and loan associations.
Most conventional loans have terms in excess of five years and are fixed-rate.
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Borrowers for conventional loans include small business owners, real estate owners and investors, corporations, and joint venture partnerships.
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To obtain a conventional loan, most borrowers have strong credit and/or verifiable income.
WHAT IS A CONVENTIONAL LOAN?
10 MUST-KNOW FINANCE TERMS
1.
Amortization
The process of paying the principal and interest on a loan through regularly scheduled installments.
2.
Balloon payment
A loan that involves small payments for a certain period of time and one large payment for the remaining principal balance, due at a time specified in the contract.
3.
Basis points (bps)
1/100th of 1% (0.01%), typically stated as a number of basis points over an index rate.
4.
Loan-to-value (LTV)
The ratio between the loan amount and the value of the property. The ratio is commonly expressed to a potential borrower as the percentage of value a lender is willing to finance.
5.
Lock-out period
A period of time after loan closing during which a borrower cannot prepay the loan.
6.
Non-conforming loan
A mortgage loan that does not conform to regulatory limits such as loan amount, loan-to-value ratio, and other characteristics.
7.
Recourse
A loan for which the borrower is personally liable for payment if the borrower defaults.
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8.
PITI
Principal, interest, taxes and insurance, the four components of a mortgage payment.
9.
Prepayment penalty
A penalty sometimes charged to a borrower who makes a prepayment.
10.
Replacement reserves
Monthly deposits that a lender may require a borrower to place in an account for future capital improvements of major building systems; i.e., HVAC, parking lot, carpets, roof, etc.