Borrower Input – The borrower provides the lending institution a proforma to establish net operating costs, income, building value, and any additional relevant financial information that may improve their application.
Appraisal – The lender conducts an appraisal to verify the financial information provided, specifically, the value of the building.
Evaluation of Underwriting Criteria – The lender will often create their own proforma with potential recalculation of the net operating income, loan to value ratio (LTV), and debt service coverage (DSCR).
Property Condition Assessment (PCA) – This assessment provides a layout of building systems, but often lenders are unaware of what relevance the status of these systems have to a property’s value.
Funding Decision – This is finalized by the lender once complete.
Also from Financial Management class: The Four Basic Financial Statements
Balance Sheet (statement of financial position) reports the amount of assets, liabilities, and stockholders’ equity of an accounting entity at a point in time.
Accounting Entity is the organization for which financial data are to be collected.