Even though a lending application has been approved and the process of finding an underwriting is well under way, there are still a number of factors that have the potential to make things difficult for the actual funds to be dispersed. As a borrower, the best thing that you can do to prepare for such an issue and prevent it from happening is to stay informed and ask questions. But what questions should you ask about commercial mortgages? Here are some suggestions:
-How is the Loan to Value determined?
This is important to understand right out of the gate, as it significantly affects both the security of a loan and the amount that a lender is going to be putting out. A borrower most certainly would not want to have the property overvalued by them only to find out that the lender has its value at a significantly lower price. Commercial mortgages are begun based on the estimates of the owner, but are completed based on the assessment of the lender. This will not only reduce the amount of the loan, which will surprise the borrower, but it also has the potential to prevent the loan from being completed altogether.
-What costs are associated with closing?
Again, this needs to be something that is well laid out at the beginning of the process. If closing costs are too high for you, as the borrower, to pay, then you will not be granted the loan. Imagine getting to the end of the process with your commercial mortgages, only to find out that you don’t have enough cash on hand to seal the deal. This will leave a sour taste in the mouth of the lender and has the potential to affect other commercial loans you might make in the future.
-Will I need a sponsor?
If you do not have enough experience in the industry, or if your financial situation, both personal and business-wise, are not up to the standards of the lender, they might require you to pursue a sponsor of some sort. This might be something that they require as the application process advances. It is simply to provide more security for their commercial mortgages. If you are going to need a sponsor and are caught off guard by this, it could lengthen or entirely end the process.
The best way to approach this is to ask lenders directly, as all are slightly different. Even better than that would be to get their answers in writing so that you have a reference to compare lenders and also to protect yourself if something were to go wrong with your loan. With a little extra effort, you can ensure that you succeed where many commercial mortgages fail.
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.