Getting a commercial mortgage loan can be quite challenging if you are not prepared enough. Mortgagers that wait until the last minute often find themselves scrambling to find a solution, only to run out of time. Before applying for a loan from commercial real estate lenders, it is important to understand the criteria that they have set for borrowers to determine their creditworthiness.
If you'll be able to meet or exceed those requirements, then it will be a piece of cake to secure much better terms to refinancing your mortgage from a conventional lender. While each commercial property loan provider may have different requirements and terms, many lenders share the same prerequisites to qualify the mortgage. Here we have outlined some useful tips which can help you get the best terms on a new commercial loan that fits your financial needs.
Recommencing with your current lender
If your financier is a potential bank, credit union, or a proficient private lender, then renewing your current loan is a viable option. You must contact them several months prior to maturity for exploring the renewal policies and contract. Also, you can check whether your lender intends to continue the business with you or not. It is typically the least expensive alternative to avoid certain closing costs and other expenses associated with a new loan just by doing a simple renewal.
However, it is not always so easy. Your mortgagee or bank might change its credit norms, asset class preferences, or lending practices in the future. They can also fall under new leadership or coordinate with some other company, which means you need to agree to all of their conditions. These reasons will automatically force you to say “no thank you” to the renewal idea.
Have a good credit profile
Whether you want a residential or commercial real estate loan, your FICO score plays a vital role in securing a “nice catch” and granting investor a credit. Remember to check and manage your credit score regularly, as it questions your capability of borrowing money or other financial products. Also, you must have specific knowledge about the land you want to finance, and a pool-size down payment to purchase that property. Before you turn your application in, make sure that your score is up to the standards of the bank.
Because of certain financial conditions, if your credit score isn’t in the best shape, then take concrete steps to improve it. Dispute credit errors present on your report and pay off outstanding debts as soon as possible. Professionals say that a score below 740 can actually cost you more interest rate. Costs could possibly range from 0.25 percent to 2 percent of the aggregate credit amount.
Get advantage of current market conditions
Regardless of a steady market and 2 percent yearly development of the U.S. economy, long-lasting and profound qualms from the 2007 recession made some monetary institutions adopt a conservative approach to lending. While the custom of commercial or residential mortgage loan is consistently rising, the underwriting standards still remain conservative.
Mortgagees’ predilection on asset classes has dramatically changed over the last few years. Many traditional CMBS lenders and national banks are shying away from shopping centers or hospitality assets because classic brick-and-mortar shops are offering a time-saving and effective approach to online retailers — otherwise known as the Amazon effect.
Conversely, the local banks and private lenders are venturing up to fill the gap and currently offering 7 and 10-year advances, with the benefits of low down payment and step-down prepayment penalties. Higher levels of rivalry between banks at this moment help create a better environment for you to grab a superior deal.
If you want to get the best terms, then discuss the loan terms and other things thoroughly with your lender. Also, a wide selection of moneylenders will increase the probability of acquiring the great rates and terms available in the market.