Finance
In Montana, a 'commercial real estate loan' typically has what key difference from a residential mortgage in terms of qualifying?
ACommercial loans require no documentation
BCommercial loans primarily evaluate the property's income and cash flow (DSCR), while residential loans focus more on the borrower's personal income✓ Correct
CCommercial loans require no appraisal
DCommercial loans are always government-backed
Explanation
Commercial real estate loans primarily underwrite based on the property's income-producing ability (debt service coverage ratio/DSCR) and value, whereas residential loans focus primarily on the borrower's personal income, credit, and DTI.
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Key Terms to Know
Debt-to-Income Ratio (DTI)
A lender's measure of a borrower's monthly debt obligations relative to their gross monthly income, used to evaluate loan eligibility.
AppraisalA professional estimate of a property's market value prepared by a licensed or certified appraiser.
Loan-to-Value Ratio (LTV)The ratio of a mortgage loan amount to the appraised value or purchase price of a property, expressed as a percentage.
Pre-ApprovalA lender's conditional commitment to loan a specific amount to a borrower, based on verified income, credit, and assets.
Math Concepts
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