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.