How to obtain commercial financing without losing your good faith, or other type of money deposit, while applying for the loan.
You may have already experienced some of these rough spots – hopefully not all.
This financing information may save you the loss of you funds and, in the case of a purchase, the loss of the property.
If the property is unique there will be issues. Except for Private Money Investors, Conforming Commercial Lender Guidelines favor properties that are not unique. They tend to loan on properties that are not to big or too small or too little occupancy and not located in a city that they deem to be too sparsely populated. For instance, a city with less than 25,000 population restricts the loans obtainable.
Big project FHA or other quasi-government loans may take a year to close. So, if you have a year, they can be great loans. Just get all the details first so your loan is not denied months into the process because you have violated some basic rule.
It is best to work through one Mortgage Broker or Broker Group. This is because there are not as many lenders in this field that you might think. If the pool of Lenders are approached by too many sources, they assume there is something wrong with the project. They get suspicious and don’t want to look at the transaction at all. Even if there is nothing wrong with the property or borrower, none of the lenders want to do the loan.
Who says yes and no? Well, some Commercial Lenders make a living taking large up-front deposits from the borrower, and never producing a loan. The best advice I can give you is not to pay many thousands of dollars for a lender to “look at your loan.”
Some of these “fees to look” lenders even give Letters of Interest, but once themoney is paid, the terms of the loan change until the borrower doesn’t want the loan any more, or just gets tired of waiting and moves on.
Don’t order the appraisal until you are fairly sure who the lender will be.
Most Commercial Lenders require that you use an appraiser from their approved appraiser list. However, some Equity Lenders do their own appraisal and don’t require anything more, or, they may use an appraisal obtained for another lender. Always try to get a copy of any appraisal that is done, especially if you paid for it.
The best advice I can give you is to have a loan backup if you can. Not having a Mortgage Broker, and going straight to a lender source, means you don’t have any choices if your primary loan falls through. If that primary Commercial Lender backs out at the last minute, your property purchase is lost.
A Mortgage Broker is in a position to attract and deal with more than one Commercial Lender at a time. They know which company is actually a lender and which company is simply another broker, charging a fee, and trying to find a lender for you himself. The actual lender will charge a loan fee anyway and generally your Broker is paid from that fee.
As I said before, this all matters because your financing contingency period will be up at some point and the seller will be in control of your earnest money deposit then. If you don’t close the transaction, the Seller may keep your substantial deposit. This where backup loans come in. You have another Commercial Lender in the wings and a way to hedge your bet.
I hope this information is helpful. Please contact me to discuss the specifics regarding your Commercial Loan scenario