Processing

You have submitted your application and supporting documents. As the lender processes your loan application, be prepared for several rounds of questions and answers as the lender works toward developing a clearer picture of the project and your ability to pay back a mortgage loan. The lender will evaluate and verify the information in your application and supporting documentation, so be as thorough as possible from the start.

If you are working with a nonprofit lender such as the Chicago Community Loan Fund, the evaluation process will take several weeks -- or even months. Approval of your project through these organizations typically involves review and approval by a committee.

At the conclusion of the application review process, the lender might:

• Need additional information;
• Deny your application. So, keep looking elsewhere;
• Refer you to another lender that can finance your project;
• Agree to finance your project on the condition that you obtain additional education on property ownership as a nonprofit. This is similar to homeownership assistance programs, which sometimes require participants to complete homebuyer courses in order to qualify for a loan. The Project Readiness Workshop, offered by the Chicago Community Loan Fund, is a basic primer for nonprofits looking to develop or purchase real estate. IFF also offers workshops on this topic; or
• Agree to finance your project.

If the lender agrees to finance your project, you will typically receive a formal approval commitment letter containing information about the loan, including:

• Amount of the loan,
• Purpose of the loan,
• Interest rate and payment plan,
• Term of the loan,
• Outline of the conditions and documentation needed prior to closing,
• Organizational documents,
• Financial statements,
• Amount of your down payment,
• Proof of insurance, and that it meets the lender’s requirements,
• Survey (if needed),
• Appraisal report,
• Proof of tax-exempt status,
• The conditions under which the contract and funding can be terminated, and
• Additional information specific to the lender and/or loan.

If your agreement letter indicates you must meet specific conditions before accepting the loan, gather the necessary documents and information. Don’t be surprised if this process takes a few extra weeks. Once you turn in the required information and documentation, the closing process will begin.

The lender will normally obtain title insurance. This policy protects the lender from loss if an unforeseen claim arises against the property, such as a secondary mortgage or government lien. Consider purchasing this type of insurance to protect the organization’s investment. During the loan processing period, a title company will search the title to the property to ensure that no one else has an ownership claim.

Before your closing, the lender will require you to purchase hazard insurance, which covers you and the lender in the event that a storm or fire damages and/or destroys the property. Many options are available, so check with your lender to make sure your coverage meets their requirements as well.

For more information about insurance, see the Mortgage Insurance section in Chapter 8: Buying Real Estate. Depending on the type of space you have, and the activities that will occur in it, you should also examine the different types of policies available in Chapter 20: Insurance.