Before you consider commercial mortgages, it is important to know what you need to qualify for one. Lender requirements are often just the beginning.
i.e. non-residential mortgages are nothing to sneeze at. In other words, you’d be surprised how much of an impact commercial mortgages
have on the overall financial future of companies. Consequently, when it comes time to enter the vast world of non-residential mortgages, it is extremely important to your eligibility. Of course, you may be asking yourself, aren’t non-residential mortgages loans similar to most mortgage loans? Well, obviously the answer to that question is no.
In general, non-residential mortgages are viewed as high-risk loans for most lenders, banks, and insurance companies. Due to this industry fact, most lenders or banks have several requirements that a borrower must meet. Moreover, if a borrower is unable to meet all the requirement set out by the lender or bank then there simply is no commercial mortgage in that borrower’s future. At first glance, this may should a little harsh, but as previously mentioned these particular mortgages have a direct impact on the future of the company, which means the borrower’s ability to meet their repayment terms often rest on these requirements.
At this point, you may be fearful of your lender’s requirements for commercial mortgages
. But, you shouldn’t be. Your eligibility and your potential lender’s expectation do not have to be at odds if you know what you are up against.
Understanding Your Lender’s Expectations For Commercial Mortgages
Thus without further ado, these are the standard requirement for most commercial lenders—clear documented property value that is equal to the value of the mortgage, a steady net property cash flow and a named guarantor of income and assets.
A clear document property that is worth the mortgage is just another way to ensure that there is a loan-to-debt ratio that is acceptable. Typically, this means that a minimum of 75 percent for a non-residential loan.
A steady net property cash flow is just the long way of saying that your business income needs to be more than your carried debt—at least 20 percent more to be specific. Lastly, a guarantor of income and assets is a fancy title for, generally, the business owner. But, nevertheless, a guarantor of income and assets is someone who agrees to pay in the event of the business defaulting. With a guarantor, it is important to note that most lenders will require the standard financial documentation (credit history, personal income, other assets, etc.) to verify that the person left potentially holding the bag can, in fact, pay.
Avoid the Pitfalls of Commercial Mortgages
Now that you know what is required of you for a non-residential mortgage make sure you avoid the pitfalls along the way. This means plan, plan and plan some more. As a future commercial property owner you should always have a clear vision for that property, you should make it a point to shop around before choosing a lender, you should clearly care about the interest rate but make sure it isn’t the only thing you care about and finally make sure there is a true financial future in the property you seek. Taking the time to do all of the above will ultimately save you from unnecessary hardship.
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
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.