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Commercial Mortgages Can Be Found By Banks, Commercial Mortgage Firms Or Private Lenders
Commercial mortgages are available through banks, commercial mortgage companies and private lenders. Commercial mortgage rates vary as widely as residential mortgage rates. Traditional banks provide some of the lowest rates available. However, they've restrictive lending criteria, which constrains them from making commercial mortgages for many kinds of commercial properties. Gas stations with or without convenience stores, for example, could be difficult to obtain commercial mortgages for. Commercial mortgages may also be difficult to obtain from traditional banks if you don't have excellent personal and business credit scores.
Hard money commercial mortgages are usually available through private lenders who have much more flexible lending criteria. Also known as hard money lenders, private commercial mortgage companies focus more the current value (today's selling price) of commercial property than on your personal financial package.
When applying for a commercial mortgage, be prepared to provide your commercial mortgage company, be it a bank or a hard money private commercial mortgage company, with the following:
- 2-3 years' taxes to you and/or your business
- 2-3 years' financial statements
- A completed regular commercial mortgage loan application, which includes a personal and business balance sheet
- An outline of the use of proceeds of the commercial mortgage you are looking for
- A description of the property
- The current selling price of the property
- The cost of improvements you'll make to the property
- An estimate of the property's value when with changes
- A repayment plan for the commercial mortgage - how you will pay this commercial back
- For a hard money bridge loan, provide an exit strategy for the commercial mortgage - will you refinance this commercial mortgage with a conventional bank after creating improvements or alterations to the existing property or some other scenario?
If you're working with a private commercial mortgage company (hard money lender) be prepared to show a proof of funds with your initial application. Providing reasonable proof that you are ready to cover the closing costs and fund the difference between commercial mortgage and the total cost of the property will make your commercial mortgage loan application move through the steps to funding a lot faster.
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