Knowing your credit score and taking steps to improve it is a vital to secure the best terms on your commercial mortgage. Ensure your score is as high as possible before beginning the application process. Once you know your credit score take concrete steps to improve it. Dispute errors and pay off outstanding debts. Your credit score will have a major impact on the terms of any mortgage you receive. Todd Huetner ,President of Huetner Capital claims “( A score) below 740, (and) it can start to cost you additional money for the same interest rate.” Fees could potentially range from a quarter of a percent to two percent of the total loan amount. If you cant raise your credit score to 740 you may have need to accept a higher interest rate on your mortgage. Another strategy is to seek out other investors in order to boost your credit profile.
You will likely have to make a substantial down payment on any commercial mortgage. Mortgage insurance doesn’t cover investment properties. Therefore having a down payment, usually ranging from 20-25 percent of the properties total value is often necessary. A second mortgage is a possible way to raise the money needed for a down payment, but this is not an ideal strategy. You may need to get creative, cashing out old life insurance policies, using equity lines of credit or taking out private personal loans in order to secure the necessary down payment
The specific property, it’s location and it’s history will likely have an impact on the terms of your mortgage. Lenders prefer centrally located properties in urban or suburban areas. The lender will want to know if the property has existing tenants and what the terms of their leases are. The longer the term of these leases, the better your situation will be. Having long term tenants ensures consistent revenue and may help you negotiate better terms on any mortgage you apply for. Have knowledge about the historic occupancy rates of the property and a detailed understanding of the previous owners income. If you can establish that the property you want to finance is historically profitable, then your mortgage is considered less risky potentially and this could lead to lower interest rates
If the location doesn’t have existing tenants it is important ask yourself if you can you pay the mortgage until you find businesses to occupy the space. In addition to having a substantial down payment lenders will often want potential borrowers to have six months of savings in reserve. To get the best terms on a traditional mortgage you will need an excellent score, have a large down payment and have substantial savings. Depending on your situation you may not meet these requirements and may want to consider other financing options. Nevertheless having an understanding of these facts, will likely help you leverage better terms on any Texas Commercial Mortgage you apply for.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com 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.