Buying a property is an exciting venture, but it does come with its challenges. One of the biggest questions buyers face is, “Where am I going to find the money?” On today’s commercial real estate show, we sat down with Jerry Song from Texas Republic Bank to get all the answers on how to secure loans. Whether it’s for a commercial or residential property, Jerry has insights that can help you navigate the financial landscape smoothly.
Meet Jerry Song from Texas Republic Bank
Jerry Song, a finance graduate from the University of Memphis, has over 20 years of experience in banking and lending. Originally from Taiwan and raised in Tennessee, Jerry now resides in Frisco, Texas, working with Texas Republic Bank. This bank is one of the oldest community banks in Collin County, established in 1891. It’s fascinating to hear that they still have ledgers dating back to their early days, showing loans for cattle and mules!
The Importance of Building a Relationship with Your Banker
In real estate, having a good relationship with your banker is crucial. Jerry emphasizes that Texas Republic Bank is unique because of its relationship-based approach. Unlike larger banks, you can meet with the CEO, David Beatty, who is actively involved in both the Frisco and Richardson branches. This local decision-making allows for faster and more personalized service.
Understanding the Loan Process
When it comes to securing a commercial loan, Jerry advises being thorough and accurate with your personal financial statement. A community bank like Texas Republic Bank can often offer quicker closings and more flexible terms compared to larger banks.
Application Requirements
- Personal Financial Statement
- Tax Returns (Last 3 Years)
- Proof of Income
- Credit Report
Common Questions
- Do you need a credit pull immediately?
- They prefer to review your financial info first to avoid unnecessary credit score impacts.
- Is there a difference between owner-occupied and non-owner-occupied properties?
- Yes, owner-occupied properties typically require a 15-20% down payment, while non-owner-occupied properties may require 25-30%.
Creative Financing Options
Jerry shares some innovative ways to secure financing:
Using Equity from Other Properties
If you have significant equity in other properties, you can use it to secure your next loan. This approach is especially useful for real estate investors with multiple properties.
401(k) and Self-Directed IRA
You can leverage your 401(k) or a self-directed IRA to fund your real estate investments. This lets you grow your retirement account while funding your purchase.
SBA Loans
For startups and new business ventures, SBA loans can be a viable option. They often require smaller down payments, though the documentation process can be more tedious. Texas Republic Bank is a PLP lender, which means they have the expertise to streamline this process.
Interest Rates and Market Trends
Interest rates are always a hot topic. As of now, the prime interest rate is around 5.5%. Jerry mentions that consumer mortgage rates have been falling, but commercial loans usually have different metrics. For commercial loans, you can expect rates around Prime plus 1 or 2, depending on various factors.
Business Loans and Lines of Credit
For business owners, having a line of credit can be a lifesaver. Jerry advises keeping a line of credit as a safety net. It’s better to have it and not need it than to need it and not have it.
Secured vs. Unsecured Lines of Credit
- Secured: Often backed by real estate or other significant assets.
- Unsecured: Based on your financial health and creditworthiness but are harder to get.
Conclusion
Securing financing for your property purchase, whether commercial or residential, can seem daunting, but with the right guidance, it becomes manageable. Jerry Song from Texas Republic Bank provides invaluable insights into the loan process, highlighting the benefits of building strong relationships with your banker and exploring various creative financing options. From leveraging equity in existing properties to utilizing 401(k) funds and navigating SBA loans, there are numerous strategies to consider.
By understanding the loan requirements and staying informed about market trends, you can make informed decisions and smoothly navigate the financial landscape of real estate. Remember, a strong partnership with a community bank like Texas Republic Bank can offer personalized service and quicker closings, making your property-buying journey a successful one.
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