In today’s commercial lending landscape, commercial borrowers have a dizzying array of lending options. Sometimes, too many choices can be just as bad as too few.
It’s always better to have the luxury to take plenty of time while looking for the right commercial loan. We all want to make good decisions, but we also can’t always wait for deals to happen, sometimes we need to be able to have the flexibility to jump on an opportunity that is a good deal. The fact is, unless you have plenty of money to invest, you probably need a quick funding mortgage partner at some point.
Until then, let’s discuss more traditional commercial lending options. But how can you be sure you’re getting the right mortgage for your needs?
You’ll want to do your homework and browse potential commercial lenders first, As you narrow your search, keep these tips in mind. By referencing the information in this article, you will have some ammo to determine if you are getting the commercial loan that fits your plans.
This article will discuss the concerns and risks with which you may be most concerned, such as:
-interest rate risk
-balloon date maturity risk
-lender speed and efficiency in underwriting
-Bringing the money to the table
-your working relationship and trust of the lender.
- Interest rates are a factor, but the truth is that investing costs more than what a loan for an owner-occupied home. Fast money requires compensation and security. So, while we know interest rates are a concern, they should not be your focus. Focusing on interest rates can come at the expense of everything else. Fast turn investment loans will have a higher interest rate.
- There will be fees and percentage-based charges. You should be aware of and negotiate these fees when possible. The lender will charge fees such as closing fees.
- If you come across a commercial lender advertising a “no-fee” loan, that means the costs are included in the rates. Plus, keep in mind your ideal monthly payment.
- Remember that even best companies can hire a terrible employee. If you’ve found a commercial lender you like, take the time to interview the specific person who will be working on your loan. How much experience do they have? Do they belong to the National Association of Mortgage Professionals or the equivalent group in your state? Determine whether these questions matter. Check out reviews and references online, and do your homework. Also, make sure their personality and communication style sync up with yours. Entering into a mortgage is a big deal, and it can change your life profoundly. Buying a commercial property can get expensive, and your costs won’t just come from the lender. If you’re unsure about any of this, your lender can either answer your questions or point you in the direction of someone who can.
- Not all lenders are created equal, and not all of them offer the same programs. The USDA offers rural development loans, which can be perfect for a business in the countryside. Remember that the down payment requirements, credit requirements, and loan-to-value ratios can also be very different between lenders, so be prepared to compare.
- The SBA offers loans on businesses, both with and without real estate under various programs. Qualification can be cumbersome and time-consuming. If you have a deal that is time-sensitive, you may want to look elsewhere to allow you to get your deal done and not risk losing the opportunity because of government red tape.
The Best Commercial Lending Deal
Today’s world moves pretty fast. That speed is great when we’re communicating on social media, or shopping online. But in today’s commercial property market, it’s not uncommon for the seller of a commercial property to receive multiple offers, especially if the property is in a great location, and it is priced competitively. If you’re looking to buy, you need to move fast, but more importantly, you need to be prepared.
Along with speed, there are more choices than ever before available to us. Take account of your financial situation and have some discussions with lenders to see how your investment may fit their criteria. Armed with this knowledge, your parameters for investment will be fine-tuned and you will negotiate more confidently, knowing where you stand with a lender. When you find the commercial property for you, you need to be at least somewhat ready to get moving on a mortgage. Yesterday, we shared a few tips with you to help find the best commercial lender and get the best deal.
Today, we’d like to share a few more.
- You’ve probably done this already, but if not, make sure you check your credit. An excellent credit score is one more supporting argument for your investment. Equifax, Experian, and TransUnion are the three main credit bureaus, and they are required by law to give you 1 free credit report per year. If your credit could stand to be improved, get in touch with a credit counseling company and start working on it as quickly as possible. You’re better off knowing about potential problems with your credit and resolving them.
- Organization and documentation make the lender’s life much easier and demonstrate that you have your act together. The opposite is a red flag to lenders, creating questions about your ability to manage the property effectively.
- When you’re talking with the loan officer, give them as much information as possible about yourself. Let them know upfront what kind of financial and professional situation you’re in. The last thing you want is to be thinking you’ve been approved for a loan only to discover you’ve been turned down.
- Think about what your long-term plan for the property is. If you can’t imagine leaving this investment property, the smart move might be to make a larger down payment in order to secure a low-interest rate over the course of 15, 20 or 25 years. Also, consider the debt service of various payments.
- These days, qualifying for a commercial loan usually requires a lot of documentation. Ask your commercial lender exactly what paperwork they need, and be ready to provide all of it. One of the main reasons the commercial mortgage process gets slowed down is because borrowers don’t have all of their paperwork ready to go.
- Before you fill out the online form to reach out to a commercial investment company, make sure you know what kind of company you’re dealing with. You may start getting emails or phone calls from commercial mortgage companies trying to lure you in. Will the company run your credit report immediately, or will they do that after you speak with a representative?