Suppose you’re new to commercial real estate (CRE) investing or want to acquire a commercial building to use for your business operations.
In that case, you’re probably wondering if you should work with a commercial real estate loan broker to get the best terms and rates.
The answer is yes—it’s always a good idea to consult a professional.
CRE mortgages are not as easy to find and qualify for as home loans. You can’t simply walk into your local bank and get a mortgage to buy a commercial property. It’s not that easy.
Here’s the reality: Unless you have a perfect credit score, a history of fantastic revenues year after year, and substantial equity in the CRE property you want to buy, your chances of getting the approval of banks may be elusive.
And even if you find a lender willing to provide you the money you need, the rates and terms will probably be unfavorable.
They might even impose a lot of restrictions and substantial prepayment penalties.
The good news is that a commercial real estate mortgage broker can help you get a loan that fast meets your goals and requirements.
This is why seasoned investors who want to refinance or purchase CRE assets routinely use brokers.
These professionals have the knowledge and the skills it takes to get the best mortgage rates.
They also have lots of connections and a vast network of high-quality commercial real estate lenders specializing in different project sizes and risk profiles.
This blog will talk about what a commercial loan broker is and their role in the CRE lending process. Read on so you can decide if working with one makes sense for your situation.
A commercial real estate mortgage broker is a financial specialist with training and expertise in securing a commercial mortgage for investors and businesses.
They can present the best options based on your goals and the nature of your project, and then provide the services you need to apply and get approved for a loan.
Business owners and CRE investors looking for commercial mortgages seek out brokers for advice on the best course of action to get funding.
A will broker also inform you (the borrower) of the lending options available, and then prepare the paperwork and negotiate terms and rates on your behalf.
When you apply for a commercial property mortgage from a single bank, you limit yourself to just that one lender.
But when you let a commercial real estate loan broker handle your project, you can get access to dozens of commercial lending options.
Aside from this, a good commercial real estate loan broker also has good relationships with the decision-makers (the underwriters) at the lending institutions in their network.
This is very important because a stable brokerage relationship is often the key to getting a loan over the final hurdles and ultimately getting approval and funding.
Brokers have to make money, of course, and they do so by charging fees to their clients. This can be in the form of packaging service fees or “success fees” paid once funding is approved.
Some brokers charge fees upfront to the borrower at the start of the process. Be sure to ask if this is refundable if your loan is rejected.
Additionally, many brokers also charge borrowers an amount equal to a certain percentage of the loan upon the release of funding papers.
These fees vary from broker to broker. Some will not charge you any fees at all because the lender compensates them.
No matter what the case, always ask about fees right away, and make sure you understand everything.
Some brokerages require clients to commit to an exclusivity period that gives them full rights to provide the client with a loan exclusively.
During this period, the client-borrower cannot work with other brokers. Should they obtain financing by themselves, they will still be contractually obligated to pay the broker a closing fee.
Finally, as a borrower, you probably want to know where your broker sends your loan documents and other information.
Unfortunately, many commercial mortgage brokers blast sensitive financial documents to multiple lenders at once—some of them being unvetted.
This can potentially put your personal information in the wrong hands.
You can avoid this by telling the broker right away that you are not comfortable with this practice, and that you want to know exactly where your papers end up.
Brokers specialize in different types of commercial mortgage loans. The right broker for you depends on the kind of loan you are interested in.
As you can see, there are many lending options for commercial property buyers and investors—and each of them has various requirements.
If you’re searching for a CRE mortgage and want to understand your options, navigate the process, and ultimately find the right lender, then it’s a good idea to work with a commercial real estate mortgage broker.
