How to Qualify for a Commercial Mortgage

For some people, getting a low commercial mortgage rate is first and foremost. But before you get caught up in what rate you’re going to get, you may want to make sure you’re going to qualify for your commercial mortgage first. There are many different factors that determine who will qualify for a commercial mortgage loan or commercial refinance. First, you should realize that commercial mortgages are different than residential mortgages in many ways. Many residential loans have guidelines set by the federal government and if you qualify under those guidelines, there is a good chance you will get a loan. The guidelines for residential mortgages are much different than the requirements for a commercial real estate loan. For the most part, residential lenders look at your credit score, down payment and qualifying income.  Commercial lenders need to qualify you as the borrower and underwrite the commercial property as well.


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.