Credit score

Your personal creditworthiness is the first thing that lenders look at, and is used to predict

your repayment reliability. A higher credit score corresponds to a lower risk of default,

which earns you a lower interest rate. See “Credit Q&A,” page 18.

Property type

Favorable property types (i.e. multifamily, office, retail, and warehouse) command a lower

rate and higher potential loan amount than riskier properties (i.e. restaurants).

Loan-to-value (LTV)

You are likely to pay a higher rate for a loan with a high LTV. In other words, a loan for

80% of the property’s value will have a higher interest rate than a 70% loan for the

same property.

Loan program

Fixed-rate loans generally start with higher rates than adjustable loans, but adjustable-rates

can rise over time and become higher than fixed. See “Interest rate structures / Options,” page 14.

Term

The longer the loan’s term (i.e. 20 years vs. 10 years), the higher the rate.

Occupancy

Loans for owner-occupied properties typically have lower rates and a higher potential

loan amount than investor properties.

Debt Service Coverage Ratio (DSCR)

The higher a property’s income relative to the loan payments (the DSCR), the more likely

the loan will be approved. Most lenders require a DSCR greater than 1.20, which means

that the property’s net operating income (NOI) must be more than 1.20 times the loan’s

principle and interest payments. Few lenders will allow a DSCR below 1.20. These lenders

take an innovative approach by combining your personal income with the property’s NOI

to approve a loan.