Best Commercial Mortgage Rates and Terms


Where do I find the best Commercial lenders, for best rates and terms?


There is no simple answer to the question of how to find the best lenders for loans for commercial property. There are two important questions which will be asked immediately by a broker or lender and should therefore be considered before contacting a bank or a commercial mortgage banker or broker. Those two questions refer to Size and Property Type. Those two will help you determine which type of lender/broker would best serve your needs.

Generally speaking, there is a different lending market for those loans over $1-2 million than for those under that amount. Even that may depend upon your community (city vs small town or rural area) and how well served the community is by banks and commercial mortgage bankers. The smaller loans and smaller communities are most often best served by banks which maintain a presence locally. If you have a long-standing relationship with a bank local to the property, it is often best to start with that bank’s commercial division. An interview of a commercial banking officer will provide you with much of the information for consideration before you make a decision to purchase or finance your property. Be sure to find out what the lending guidelines are. Please bear in mind that most banks require a personal signature/personal guaranty of repayment.

Beyond banks, you should search the Internet and your local yellow pages to identify which companies advertise themselves as commercial mortgage bankers/brokers in your community. Ask business associates and commercial real estate brokers well known to you for their recommendations re mortgage bankers, brokers and banks. If you know anyone in the property title business, ask them too. The earlier that you can do that the better and hopefully well in advance of signing any sort of letter of intent or contract for the purchase of a commercial property. Once you identify who is recommended, as with the banks, you might want to schedule an appointment to determine what the lending criteria will be and how they will look at and underwrite the proposed property type.

There is a generally a major difference between firms that market themselves as mortgage brokers and those that market as mortgage bankers. The difference becomes more critical the larger the prospective purchase and resulting mortgage. Mortgage bankers are generally those individuals/firms which maintain a correspondent relationship with major commercial lenders ie. they service the loans after closing and have a territorial representation. That relationship is often exclusive for a designated geography giving that group alone the right to bring a loan to that lender. The lender and firm generally have a long history together and the mortgage banker may handle the initial underwriting and closing. Mortgage brokers typically do not have this kind of relationship with the lenders. There are lenders that allow submissions from many brokers and do not necessarily have any history with any of them. That often results in competitive submissions of the same property from different brokers which is not in the borrowers favor. Over the past 20 years, Wall St. firms have become players in the mortgage market. Some have designated originating brokers others allow a borrower to go to them directly. Bear in mind that these transactions often carry high fees so it becomes somewhat prohibitive for smaller loans.

It is wise to present your property to more than one banker/broker/mortgage banker. While interviewing your potential choices, be sure to ask about the fees charged by them and by the lender. It is not uncommon for there to be fees charged by each. Also ask whether they will ask that you sign an agreement to allow them to have exclusive control of the deal while looking for lenders. If you can it is advisable initially to give each an exclusive for specific lenders not for the entire marketplace. you can control where your deal is shopped that way. Once one of them comes to you with deal terms that are satisfactory, it is likely that you will then be asked to sign an agreement to give that banker/broker complete exclusive control for the next 45-60 days to finalize the loan details. If the terms are what you want, you will be well served to agree to the exclusivity. Bankers and Lenders are more likely to put forth their full efforts if they know that producing a commitment per the specified terms will result in a deal.

When you initiate contact with a commercial lender it is wise to have your plans for the property complete. You will need to provide all of the property details ie. age, how long you have owned it, what it cost, the tenant roster with rent details, (rent per sq ft, # of sq ft, maturity date of lease, options to renew and at what rate) as well how much you want to borrow and what you want to do with the proceeds. You can summarize that in a Proposed Sources and Uses of Funds. Most lenders will want you to have equity(your own money) in the property and each will have their own way of looking at and calculating that.

I hope that helps.

Answered over 9 years ago
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