If you have never experienced the process of applying for commercial real estate loans then you could be very shocked. The process is much more in depth than a personal real estate loan or mortgage.
Most consumers are fairly familiar with the process of getting a home mortgage and they naturally believe that securing a loan for a commercial property must be very similar. But the fact is that because most commercial loans are not government backed like personal mortgage loans, the lenders are much stricter in qualifying the eligibility of borrowers. So commercial borrowers need to educate themselves to have realistic expectations.
Most borrowers are going to turn to their most familiar lender when they are considering commercial real estate loans, which is often their bank. Unfortunately, banks often have the toughest eligibility requirements and the longest application process. They will want to see income sheets, balance sheets and cash flow statements dating back several years. It can take several weeks to get even a verbal approval from your bank. And then the application still needs to be approved by the credit committee who can reject the application even after the verbal approval has been given. Seeking other lenders or alternative lenders online might be a good idea and can be used as a backup plan in the event of a rejection from your bank.
Regardless of type of lender that you are applying to, there are certain documents that you will want to have prepared to submit with your commercial loan application. Because there is no government backing on these types of loans, lenders want to be very thorough in their vetting process. They are looking for a certain level of stability from your business and will want to see that documented over a period of 3-5 years. They could request leases, asset statements, the original corporate documents as well as the personal financial records of the business owners. So not only do you need to have your business on stable financial ground but you also need to have your personal finances in order. Having this documentation ready will save time on the application process but be sure to ask for a list of required documents in your first conversation with a lender. This will help you to efficiently select lenders with whom you know you can qualify.
As you are speaking to potential Commercial lenders, it is a good idea to ask for a complete fee structure list. Many commercial mortgages express fees as interest and points. So be sure that you determine the total of these two fees for the overall rate. Also ask about any legal fees, survey fees, any loan application fee or appraisal costs that you might be required to pay. All of this information will help you to determine which loan is the best suited to meet your needs.
Do Your Due Diligence and Be Prepared when you apply for a Commercial Mortgage
Requesting a commercial loan for a real estate purchase is a big step and one that deserves research and planning. Having a knowledge of the process of a commercial mortgage and the time frame can greatly reduce your stress and increase your potential for getting the loan that you have applied for. This is the next step in the growth and success of your business.
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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