How to Qualify for a Commercial Mortgage
What Commercial Mortgage Lenders Look for When Qualifying Borrowers and Determining Rate
- Property location – Properties in large urban metropolitan areas are considered lower risk and are preferred.
- Credit Score - Above 680 is preferred
- Down Payment – 20%-25% down is expected, unless the property is owner occupied and we use the SBA small business programs
- Qualifying Income – the property needs to show adequate cash flow to service the debt
- Established tenants – A chain restaurant is more desirable then a generic restaurant
- Do the majority of tenants have long term leases?
- Is there a good history of stabilized occupancy?
- Has lease turnover been kept to a minimum?
- Is the property in good condition?
- Lower leverage is better – Is your loan to value 80% or 50%?
- What is the borrower’s net worth?
- What is the borrower’s cash liquidity?
- Does the borrower have experience managing property?
Who Are the Commercial Mortgage Lenders?
- Commercial Banks
- Local and Community Banks
- Agency Lenders
- Conduit Lenders
- Insurance Companies
- Credit Unions
- Private Lenders
Commercial mortgage brokers have access to all of these lenders and that is why they can be a good choice in getting the lowest rate and best terms for a commercial mortgage loan.
Good Borrowers and Good Properties
While all of this information may seem complicated, it really comes down to this: good borrowers and good properties. If you are a borrower with a good credit score and assets and you are buying a property that is in good condition and in a good area there is a great chance that you will not only qualify for a loan but receive a favorable rate as well.
You can find more information on commercial mortgage loans here.
Author
Stephen A. Sobin is the President and Founder of Select Commercial Funding LLC. Mr. Sobin has over 35 years’ experience originating commercial real estate loans. He formed Select Commercial to offer commercial mortgage banking and real estate capital advisory services to his clients on a national basis. His goal was to become an advocate for his clients and to help them navigate the ever-changing economic conditions facing the banking industry and to assist them by providing access to commercial real estate funds despite the uncertainty of the capital markets. The company was founded on the belief that most small to medium sized property and business owners lacked the expertise and sources to obtain the best financing options in the $1,500,000 to $10,000,000 range. While large real estate companies often have in-house finance professionals, most small to medium sized borrowers do not have the same access to professional advice and sources of funds. Mr. Sobin focuses on providing those services to this segment of the market.