Seeking out and obtaining a commercial mortgage is a time consuming and tricky process that requires you to be incredibly prepared and pay a lot of attention to detail. So, make it easier on yourself by ensuring that you take into account these pitfalls before they catch you by surprise.

While avoiding these pitfalls will not guarantee that you will land a commercial mortgage, it will certainly help to hedge your bets and impress lenders. If you fall into these categories, don’t despair. There are plenty of ways to minimize your weaknesses when it comes to being perceived as a high-risk borrower.

Not Having Enough Equity – Borrowers who have little “skin in the game” are not appealing to lenders. This is not to say that it is not possible, but it is much more difficult to convince a lender to grant you a loan if they are the ones that are taking on all of the risk. Borrowers who are able to share risk are much more appealing to lending agencies.

Keeping Important Information Until The Last Minute – Lenders like to have everything laid out in front of them at the start of the process of approval. So, it is a big mistake to hold any information back. If you do this, chances are the lending agency will find out about it anyway, and you will look suspicious and dishonest. That is not a good impression to leave with a lender who is going to be working with you toward your commercial mortgage.

Lack Of Planning – Borrowers sometimes do not take into account various contingencies for how things might progress once they have obtained their commercial mortgage. Lenders are not a fan of borrowers who do not think through various problems that could arise and develop plans to overcome and minimize them. From the lenders point of view, a lack of planning reflects on an inability to take thing seriously and be responsible. That points to a big liability as far as lenders are concerned.

Being New To The Game – It’s a catch 22. Lenders do not like to grant loans to borrows who are new to the commercial real estate landscape, but that makes it harder to build up your rapport in order to more easily obtain loans. This does not mean that you are not going to get a loan if it is your first business venture into real estate. It does, however, mean that you are going to have to work extra hard to ensure that you are not perceived as a high-risk borrower.

What do you do if some of these pitfalls apply to you in your pursuit of a commercial mortgage?

You are going to have to work extra hard to overcome your weaknesses. Start by having everything in order, with as much attention to detail as you can possibly muster. Communication with your potential lenders is also going to be incredibly important. Be honest about where you believe you fall short. They might even help you with strategies to circumvent some pitfalls. Don’t try to hide anything from them. Doing so comes off poorly and will damage your relationship with them. Being open and honest is one thing that you can do, regardless of other things that might get in the way of your commercial mortgage.

Dennis Dahlberg Broker/RI/CEO/MLO
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.