Commercial Mortgages: How To Evaluate Your Eligibility

Before you consider commercial mortgages, it is important to know what you need to qualify for one. Lender requirements are often just the beginning.

Commercial mortgages 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.

Dennis Dahlberg Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:      (512) 516-1177 
Dennis@level4funding.com
www.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.

Commercial Mortgage: The Real Deal On Commercial Lenders

If you need a commercial mortgage, we have many options to fit your budget and needs. Read on to learn more about commercial lending and how it can help you grow your business. 

The commercial real estate market is forever changing and if you do not take the time to keep up, you may be lost when it comes time to consider getting a commercial mortgage for your next endeavor. The truth is that more people than ever are creating new companies and running their own businesses. Moreover, many of these individuals have never had to borrow money for business—unless you’re counting student loans. But, all joking aside if this is your first-time “borrowing for business” you may be surprised at all the things you just didn’t know.

For starters, if you thought Fannie Mae or another governmental institution was going to be your new best friend think again. Though you can still count on these governmental mortgage institution for such commercial properties as multifamily housing,  if you are not in the business of property management  then you will more than likely not be dealing with old’ Fannie or Freddie. Thus, the majority of commercial mortgage loans are brought to you by banks, insurance companies and lenders. Here at Level 4 Funding, we have a specialized commercial mortgage team that can help with all of your commercial lending needs. 

So, now that you know just who you are dealing with, let’s talk about what happens next. Typically, before you reach out to a lender, bank or insurance company for financial assistance with your commercial venture, you should be clear on just how you are going to meet your future repayment terms and you should be clear on how much you actually need to borrow. These are important things to be clear on because your future commercial mortgage more than likely will be a nonrecourse loan i.e. the bank or lender can take the property in the event of a default (generally if you owe more than the value of the property at time of default, your other assets cannot be seized with a nonrecourse loan.).

Things to consider when Borrowing for Business

Besides knowing how you are going to meet your repayment terms and how much money you actually need to borrow, there are a few other important factors to consider once you’ve set your sight one a few commercial lenders or banks and they include:

1.      Reputation and convenience

2.      Interest rates and available programs

Clearly, you want a mortgage that will meet your needs and without causing you hardship later down the road.

            Refinancing Advice

Speaking of hardship later on, if you already have a mortgage but are interested in changing your business’s financial outlook, then you definitely should consider your possible commercial refinancing options. Remember you have several options that can help your business bottom line. For instance, you may have borrowed for business at a not-so-great interest rate; instead of kicking yourself while you are down why not take advantage of a lower rate or even switch to a fixed rate?  Either of these commercial refinancing options are great ways to reduce total loans cost.  Moreover, there are several other commercial refinancing options out there—all you have to do is ask your lender or broker for more details.

Dennis Dahlberg Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:      (512) 516-1177 
Dennis@level4funding.com
www.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.