When you are shopping for commercial mortgages there are many terms that you will need to negotiate with the lender. But there are also some key pieces of information that the lender will be taking into consideration when they are determining the interest rate that they will offer you. Knowing what the lender is looking for and what the lender considers a good property can help you to secure a better interest rate and possibly even help you in negotiating the other terms of the loan.
One of the first things that a lender is going to look at is the applicant’s credit rating. The lender wants to be sure that you have good credit and also a strong net worth. These two factors are a good indication of how you would be able to withstand a short interruption in your cash flow. The lender is also interested in your work history and how much management experience you have. They need to know that your business is in good hand, will be managed successfully and will be able to make the payments of this long term commitment.
Lenders are also looking at the property that you want to purchase. Commercial mortgages are often secured by the property being purchased, it is the collateral, and the lender wants to be sure that the property will remain valuable. With this in mind, the lender is interested in the location of the property and that it is not too rural. This can make the property value more volatile and its value could become questionable. They are also interested in the history of the building, any past tenant information and if there are any current leases for any portions of the property.
Lenders never want to think that they are funding poor applicants for commercial mortgages. But they do have a system in place to protect themselves in case there is an unforeseen issue. Businesses can fail for many reasons and some of them are not predictable. So the lender will require that you offer collateral for the loan. This is normally the property that you are purchasing. And in the event that you default on the loan then the bank will foreclose on the property and sell it to recover their investment. This is the reason that a lender wants to verify the actual value of a property that you are purchasing.
Understanding all of the main criteria that a lender is interested in to determine your creditworthiness is very helpful. It allows you to create a packet of information to submit with your application demonstrating all of the qualities that the lender favors as well as showing your financial stability. Meeting all of these criteria will make you a more favorable candidate and get you a better rate on your loan.
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.