When considering a loan request, lenders use different ratios to determine creditworthiness for a borrower. Even though commercial real estate financing relies heavily on the property’s net operating income to underwrite the loan, borrowers are viewed as a secondary source of repayment for the loan in case anything should interrupt the cash flow from the property. Besides examining a borrower’s credit history, net worth, and liquid assets, a lender will also consider the borrower’s debt-to-income ratio.
The debt-to-income ratio (DTI) is the ratio between a borrower’s monthly obligations, such as credit card debt, automobile loans, and real estate loans, and the monthly gross income, including salary, commissions, interest income, and social security benefits. Some lenders also refer to this as the Personal Debt Ratio. In most cases, lenders prefer a ratio of less than 50%, although this of course can depend on the lender and loan program
The debt-to-income ratio can be calculated according to the following:
Monthly Obligations / Gross Income = Debt-to-Income
As explained above, monthly obligations are the payments that a borrower must make every month for both short-term and long-term liabilities. The gross income can encompass every source of income available to a borrower, including net rental income from other investment properties.
While not an important investment concept for agents, the debt-to-income ratio nonetheless can pose a challenge for borrowers seeking financing. When calculating the DTI ratio, most lenders will refer to the two years of tax returns for a borrower in order to determine the average adjusted gross income (AGI) for a borrower. The AGI will take into account personal income, passive income, and net rental income. In addition, lenders will add back depreciation allowances (from Schedule E) and net operating losses (from Schedule C) to arrive at a more accurate understanding of a borrower’s capacity for repayment.
Yes, this is perhaps too much information for you to know right now, but it is an essential part of determining creditworthiness for borrowers seeking financing!
"Dedication, knowledge, and Perseverance are the 3 words that best describe the way ALB Commercial Capital, and Leonard in particular, assisted us throughout the process of obtaining a commercial loan. We look forward working with them again in the future.”
Dear Leonard and Team,
As an experienced investor, I have worked with numerous commercial mortgage brokers, but none have matched up to Mr. Manriquez. Leonard and his team provided me with exceptional services every step of the way. The process was efficient and seamless as their knowledge provided me peace of mind. I have made the decision that going forth, Leonard Manriquez will be my exclusive mortgage broker.
I wholeheartedly recommend ALB Commercial Capital. Truly thankful for your excellent services.
Bertha A Huizar
And to all who would use his services. I endorse them wholeheartledly:
I have used the services of ALB Commercial Capital and ecspecially those of the leader, Leonard Manriquez, at least (4) times in the past several years and have always found them to be topflight, and very professional. I highly recommend them to anyone who wishes to expedite real estate loans with a minimum of hassle.
C. Girot Attorney At Law
I refer all of my commercial clients to Leonard Manriquez the owner of ALB Commercial Capital. Not only does he understand all the ins and outs of commercial lending but he has a way of putting my clients at ease knowing they are in good hands and he keeps me updated all the way to closing. Having a lender like this actually help me in building my repeat and referral business.
I have had the pleasure of knowing and working with Leonard Manriquez from ALB Commercial Capital for over 30 years. Leonard is a consummate professional and can get your commercial transactions closed in a smooth and timely manner. He specializes in 5+ to 100 Units or more, Leonard is your Go To lending professional for transactions Nationwide. I would recommend Leonard in a heartbeat, as I have done many times before.
It is in my sincere humble opinion that I am totally grateful on behalf of my bank to take recognition in the fact that ALB from the level of professionalism , may it be the initial stages of the deal summary, to the deal related information, the collaboration about all aspects of the deal structure, last but not lease the processing team at ALB, it is the most outstanding firm that I have been blessed to work with.I am honored and blessed to be able to have the opportunity to work with your firm, as ALB would be a leading example for other brokerage houses to take notes from.
“We work with some of the most active commercial mortgage brokers in the west coast. ALB Commercial Capital has a platform that consistently delivers exceptional results to their borrowers. The proof is that borrowers come back to ALB time and time again!”
“As a commercial real estate banker for the past 14 years, I have had the opportunity to work on thousands of transactions with several different mortgage brokerage companies. Throughout that time ALB Commercial Capital has been one of the most honest, transparent and flat out best brokers I have ever worked with. Their commitment to their clients and expertise make them a pleasure to work with.”
“ALB Commercial Capital is our primary source for multifamily and commercial lending. They always perform on their word, and are few of the reliable lenders that will close on our transactions in a timely manner. We would not trust our clients, transactions, and 1031 exchanges with any other lender, and would highly recommended them to anyone looking for a lender that will go above and beyond their scope of responsibilities with the objective in closing your transaction.”
“I have been working with Leonard Manriquez and his Team at ALB Commercial Capital for the last 5 years. Leo and his associates bring a level of professionalism to every transaction and provide their clients with the best possible service. ALB Commercial Capital is one of the top leaders in the Commercial Real Estate Brokerage market today. We have built a strong working relationship together and would highly recommend their services to anyone looking into investment properties.”
“Dear Leo, I wanted to take a moment to formally thank you for the time and effort you and your team have spent working on our behalf. After having helped us with so many Apartment loans-and always with the best terms- I can say with honesty that your work is not just outstanding in terms of content, but also through your kind demeanor in how you present it. We look forward to working with ALB Commercial Capital through you in the future for all our commercial real estate needs.”
“ ALB Commercial Capital is incredible! They continuously help me in meeting all my needs when funding my loans. Whether your needs are great or small, ALB commercial is the way to go.”
“I have been working with and referring clients to Efon for the last 7 years. The transactions I have been involved with and also my referral transactions have gone very smoothly. Efon and ALB have proven to be a great resource for Multi-Family lending.”
“As a client and an agent, I always recommend ALB Commercial Capital. I have lost count of how many loans I have done with them, but they have always delivered even on the most complicated loans. You will not find a more experienced and skilled Brokerage to get your loan to funding.”
Very professional, ALB guys go above and beyond to help achieve the goals. I can’t imagine looking to any other place.
"Leonard Manriquez and his team at ALB Commercial Capital have been an invaluable resource as we have grown our business over the last decade. Mr. Manriquez has a strong knowledge of the industry and is able to problem solve at a high level. We have worked with him on more than $100M worth of transactions and have never been disappointed with his ability to secure the best rate and terms available. The ALB Commercial Capital team is motivated, hardworking and very smart. Highly recommended."