Lending Resources and Guides

Free checklists, glossary, and guides from Coventry Enterprises LLC. Know what you're signing before you sign.

Loan Review Checklist

Ten things to verify before signing any loan agreement. Use this as your baseline before any closing.

1

Compare loan estimate to closing disclosure. The final terms should match what was quoted. Any changes require an explanation. Fees, rate, and loan amount should all be consistent.

2

Calculate the APR, not just the interest rate. The Annual Percentage Rate includes fees and reflects the true cost of borrowing. A low rate with high fees can cost more than a higher rate with low fees.

3

Identify and quantify all prepayment penalties. If you plan to sell or refinance within 3 to 5 years, a prepayment penalty can significantly affect the economics of that decision.

4

Understand the rate adjustment mechanics if the loan is adjustable. Know the index, margin, initial cap, periodic cap, and lifetime cap. Calculate the payment at the maximum rate.

5

Verify the balloon payment date and amount. If the loan has a balloon, make sure you have a clear and realistic plan to refinance or sell before it comes due.

6

Review all fees: origination, processing, underwriting, document preparation. Total loan costs should be proportionate to the loan size and consistent with market norms. Unusual fees require explanation.

7

Check for personal guarantee requirements. Particularly on business and commercial loans, understand whether your personal assets are pledged as security for the loan.

8

Review any covenant or maintenance requirements. Commercial loans especially may require ongoing DSCR maintenance, financial reporting, or occupancy thresholds. Missing a covenant can trigger default.

9

Understand the default triggers and cure periods. What constitutes an event of default? How long do you have to cure it? What are the lender's remedies? These provisions matter when things go wrong.

10

Get a second set of eyes before signing. For any significant loan, an independent review by Coventry Enterprises LLC costs a fraction of what a problematic loan term can cost over its life.

Lending Glossary

Key terms every borrower should understand before reviewing loan documents.

APR (Annual Percentage Rate)
The true cost of borrowing expressed as a yearly rate, including interest and most fees. A more accurate cost comparison than interest rate alone.
Amortization
The process of paying down a loan through scheduled principal and interest payments over time. A fully amortized loan is paid off at the end of the term.
Balloon Payment
A large lump-sum payment due at the end of a loan term. Common in commercial loans and some short-term residential products.
Bridge Loan
A short-term loan that covers a gap between two financing situations. Typically 6 to 24 months with interest-only payments.
Cap Rate
Net operating income divided by property value. Used to measure investment property yield and compare properties regardless of financing.
Defeasance
A prepayment method used in commercial loans where the borrower replaces the loan collateral with government securities rather than paying a cash penalty.
DSCR (Debt Service Coverage Ratio)
Net operating income divided by annual debt service. A ratio of 1.25 means the property generates 25% more income than needed to cover loan payments.
DTI (Debt-to-Income Ratio)
Monthly debt payments divided by gross monthly income. Lenders use this to assess a borrower's ability to take on additional debt.
Draw Schedule
The structured release of construction loan funds tied to project milestones. Funds are disbursed after each phase passes inspection.
Equity Stripping
A predatory lending pattern where loan structures systematically remove home equity through excessive fees, high-rate debt, or forced default situations.
Hard Money Loan
A short-term, asset-based loan from a private lender. Higher rates and fees than conventional financing, valued for speed and flexibility.
HELOC
Home Equity Line of Credit. A revolving credit line secured by home equity, typically with a variable interest rate.
Interest Reserve
Funds set aside within a construction loan to cover interest payments during the construction period.
LTV (Loan-to-Value Ratio)
Loan amount divided by property value. Higher LTV means more leverage and typically higher rates and stricter terms.
Negative Amortization
When loan payments don't cover the full interest due and unpaid interest is added to the principal balance, causing the loan balance to grow.
NOI (Net Operating Income)
Gross rental income minus operating expenses (not including debt service). The core income measure for commercial real estate underwriting.
Points
Upfront fees paid to the lender at closing, typically expressed as a percentage of the loan amount. One point equals 1% of the loan.
Prepayment Penalty
A fee charged when a loan is paid off before the scheduled maturity date. Can be flat percentage, step-down, yield maintenance, or defeasance.
Rate Cap
On adjustable rate loans, the maximum amount the rate can increase per adjustment period (periodic cap) or over the life of the loan (lifetime cap).
Recourse Loan
A loan where the lender can pursue the borrower's personal assets beyond the collateral property in the event of default.
Yield Maintenance
A prepayment calculation that compensates the lender for the full difference between the loan rate and current market rates for the remaining term. Can be very expensive in low-rate environments.
ARV (After-Repair Value)
The estimated value of a property after planned renovations or construction are completed. Used to underwrite fix-and-flip and construction loans.
Origination Fee
A fee charged by the lender for processing and creating the loan. Can be expressed as a flat dollar amount or a percentage of the loan.
Seasoning
The required length of time a borrower must own a property or hold a loan before refinancing or certain transactions are permitted.
Teaser Rate
An introductory interest rate on an adjustable loan, set below the fully-indexed rate to attract borrowers. The rate adjusts higher after the initial period.
Cross-Default
A provision in a loan agreement that triggers default if the borrower defaults on any other loan, even one with a different lender.

Guides and Resources

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Toxic Loan Guide

Adjustable rate traps, balloon payment risks, negative amortization, and equity stripping. Know the structures that harm borrowers before signing.

Read Guide
🏗

Construction Loan Guide

Draw schedules, interest reserves, builder requirements, and project underwriting. Everything a borrower needs to understand before financing a construction project.

Read Guide
📈

Loan Types Complete Guide

Every major loan type explained: conventional mortgages, FHA, VA, jumbo, construction, bridge, hard money, DSCR, commercial, and more.

Read Guide

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