When planning to develop commercial real estate, it can be most difficult to overcome the great financial humps that come with starting a business unless you possess a lot of cash up front. Fortunately, commercial mortgage loans make it possible for many business owners and investors to obtain the funding needed to get the job done. A commercial mortgage loan is a loan created specifically for purchases of real estate that will be used to produce an income. The real estate might be used to build new offices, hotels, or other establishments, to buy an existing business building, to develop properties for rental or investment purposes, or to extend an existing property.
Steps to Approval
Applying for a commercial mortgage loan is simple; getting approved is the tough part. Lenders usually require a positive business and/or personal credit rating, a business plan or proof that your existing business is profitable and stable, and a positive debt/income ratio, which demonstrates that there's enough cash available to cover your monthly payments. Standard commercial mortgage loan requirements include personal financial statements with a list of personal assets, personal and/or business tax returns for the past few years, and details about any collateral available to secure the loan.
If you need a commercial mortgage loan and have less than perfect credit, or limited collateral or cash on hand, there are non-traditional commercial lenders such as private lenders that can help even when major lenders turn down your loan. There are also private equity firms and wealthy individual investors that are sometimes willing to lend money in more risky situations.
Non-traditional funding sources are able to offer assistance because they're not tied directly to the main credit scene. They are portfolio lenders, meaning they will hold on to your loan rather than sell it. They are able to lend money even during a credit crisis because, unlike banks, they are cash rich and are not dependent on the credit markets for liquidity.
A pre-approval may take place before your final approval. Though the pre-approval is not "final" it does give you and the lender an idea of where you stand in terms of credit and how the lender views your situation. The final approval process may take several days, weeks, or even months depending on how quickly you can gather all information needed.
The key to getting an approval (and getting it quickly) is to study the process of loan approval beforehand and be sure to have all your necessary documents and information ready. Make copies of all your documents, tax returns, business plan, etc. If offering collateral such as land or developed property, be sure to have a copy of the deed on hand as well as an appraisal (if available). Place these documents in a business envelope and be ready to present whatever documents are needed when asked. Also, be prepared for closing costs and other expenses that may come up throughout the process.
If you need help with your commercial real estate loan, speak with a loan broker for advice. A loan broker can help you find the lender that's right for your needs. The broker will also determine the fees along with terms and conditions from various lenders to help you make the best decision.
There are loan brokers online to help you through the entire commercial mortgage loan process. Get started today to realize your business dreams!
You will hear mortgage people throwing around words like Pre-Qualified, Pre-Approved & Approved. What do these mean? Which do you need to purchase a home? This article will rapidly sort this out for you. Pre-Qualified: For this only basic information would be gathered from you to qualify you for your new home loan. This would include looking at your credit and your debt to income ratio (much do you owe including the payment for your new mortgage vs. how much you earn). You would also be asked if you are working and for how long. This is a very fast and very easy process. Pre-Approved: A Universal Loan Application {1003} is taken. Some forms may need to be signed. Income documentation may be gathered at this time, but is not necessary for a pre-approval. This would be up to the discretion of your mortgage broker. After this, your loan would submitted to "Automated Underwriting". This is a computer program that compares all aspects of the loan to specific standards. This would generate a "Pre-Approval." This does not mean that the loan will be approved with 100% certainty; however, there is a high probability that the loan would go through to final approval and close. Depending upon the results some more information may need to be gathered or your loan may need to be repackaged and processed a different way. In most cases an approval would be obtained fairly easily after you have found a property and contracted. During this phase the loan is submitted with a "to be determined" address. When you contract on a home an actual address would be entered. Normally after the pre-approval is gotten and while you are looking for a home all the documentation would be gathered and disclosures would be signed by you. This would save time when you actually do find a home. Approved: After the loan is pre-approved, you have found a property and all needed documentation is gathered, it is sent to the underwriter. The underwriter may inform me that additional conditions need to be met. These are commonly referred to as "Conditions to for Docs". This simply means these items are needed before the lender will draw your closing documents. After these conditions are met, your loan is approved. This is confirmed to you immediately and a "Clear to Close" order is given. As you can see from above a Pre-Qualification will just give you an idea if you can even obtain a mortgage. The Pre-Approval is what you need to start shopping for a home. You would be issued a "Pre-Approval Letter" that you would present when you sign the contract. Finally, after you are approved, you would close on your new home. It is important to understand this and other aspects of the home buying process so you can get the most out of your efforts. Always make sure you are prepared and do your home work. This will make the home buying process much easier.
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