What commercial mortgage lenders look for
The lending industry as a whole has changed over the last several years. Below is a brief summary of what most commercial mortgage lenders look for when deciding on whether or not to approve a commercial mortgage loan.
Commercial lenders will always look closely at the borrower and co-borrower. The borrowers credit rating will always be a factor. A FICO score of at least 620 is usually required and most lenders want to see a score over 680. Lower scores may be accepted on a case-by-case basis and with compensating factors (like very strong collateral or strong personal assets). The borrowers should have good liquidity and a high net worth. The minimum net worth will ideally equal the loan amount. The minimum liquidity will ideally be equal to six months of principal, interest, taxes and insurance.There are always exceptions and we have many lenders who will waive this requirement for the right deal.
When the owner is looking to pull cash out after a very short period of ownership it will scrutinized by our commercial mortgage lenders. A borrower should ideally have vested equity in the project. Expecting 100% financing from a commercial mortgage broker isn't realistic. A borrower will ideally have a good amount of personal experience owning and managing properties like the commercial property they would like to have mortgaged.
The lenders will often look closely at the neighborhood the collateral is in. The commercial property should be located in a well established or emerging market with a growing population of at least 75,0000. This area should not be experiencing any significant or notable declines in population. Excessively rural areas are not viewed in a positive light. The area should exhibit diverse employment and/or economic base. Finally, the property must be located near, and easily accessible to, major highways/freeways, employment sources and other notable landmarks of emerging industry.
The condition of the property is always a huge factor. Lenders will always prefer newer construction. Older properties in good shape, or commercial properties that have undergone recent renovations, are usually acceptable.
While the guidelines for a commercial mortgage can be tough, there are lenders who are eager to lend. Please call us at (707) 27-TOWER for a no obligation consultation.