Commercial Mortgage Lenders

Are you considering buying a commercial property? You’ll be getting a mortgage, and commercial mortgage lenders set up these loans. There are stringent guidelines to follow if you want to qualify, and these are different from a typical home mortgage. When you purchase a home, the mortgage is backed by an entity like Fannie Mae. With a commercial mortgage, you may be backed by the federal government so rules and requirements change. It’s a big decision and a lot of responsibility, so it requires careful calculation, preparation and consideration by the borrower. Determine how much you can really afford, and don’t borrow more than that. You must be able to prove to the commercial mortgage lenders that you can make the payments. Most commercial mortgages have a balloon payment that is usually due between three and ten years from start of the contract. You might have to refinance into another loan prior to that, which will mean incurring extra costs for closing and the possibility of higher interest rates. It is in the borrower’s best interest to work with the commercial mortgage lenders to try and secure a mortgage without the balloon payment. The lender will carefully review your financial statements prior to approving the loan. Ask your commercial mortgage lenders for a specific list of documents you need to provide. These will likely include tax returns, statements of assets, operating statements, and lease documents. Have your paperwork prepared prior to the initial meeting. Some financial institutions require a certain level of deposit with them in order to qualify for a commercial loan. Ask about all qualifying criteria before you proceed. You should be informed by any commercial mortgage lenders of all additional obligations for the loan. You may be required to provide regular financial reports for the term of the mortgage, in addition to making the monthly payments.

Be sure to have a list of questions to ask the commercial mortgage lenders so there is no misunderstanding on the type or terms of the loan. Is it assumable, or should you sell the property before it is paid off? Are there prepayment penalties, and can you negotiate a loan that eliminates them? What additional costs are associated with the commercial loan, and how much will you be required to pay for lender points and fees, property surveys, environmental or radon reports, and legal fees? Some commercial mortgage lenders assume these costs, and often there are less costly options available if you ask.

The process of getting a commercial loan can be more complicated than many borrowers assume. The property you are buying serves as your collateral. The commercial mortgage lenders will do an assessment of your ability to repay the loan, and determine your credit worthiness. The terms and conditions of a commercial mortgage can vary, so be aware of the details. In a non-recourse mortgage, the creditor is allowed to seize the property and use it to recover the outstanding loan if the borrower fails to make payments. Since the property is held as security against the loan, they sell to recover payment but cannot go after any other of the borrower’s assets, so the borrower is then released from obligation to make additional payments on the outstanding amount.

Discuss all the possible options with the commercial mortgage lenders, who should explain in detail how the loan will be structured. Look at your target property and determine if it is worth the risk inherent in any loan. You need to be confident that the income you will receive from the property is positive, and will have to convince the commercial mortgage lenders that you are able to cover the payments you will be assuming through the loan.

Alternatively, if you are unable to obtain a loan from a commercial mortgage lender, try a hard money lender that services your local area.  If you don’t know of any, simply search the internet for the phrase “hard money lender” and several should show up.  Last, but not least, go to some local self directed IRA investor meetings.  There are often people there who would like to fund a real estate deal, and can often provide competitive rates to those found with commercial mortgage lenders, and often require less paperwork.