- March 6, 2018
- Posted by: steve
- Category: commercial mortgage
Commercial Mortgage Rates don’t have to be unreasonable. There are many lenders who are willing to work with and watch small businesses grow.
Just because they’re willing doesn’t mean they’re the right choice. Business owners need to consider all their choices before signing for a commercial loan.
How can business owners get the best rate? By doing their research, preparing, and asking questions. Educating yourself and staying present in the process can get great commercial mortgage rates.
1. Use the Best Credit Score
If a business has multiple owners/partners, take the time to assess their credit scores. While all owners/partners names will be on the application, the person with the highest score should apply.
The primary person on the application should have a credit score of 680+. Banks want to lend to people who have better chances of paying them back. The higher the credit score, the better the commercial mortgages rates.
2. Choose an Easy-to-Rent Area
If things were to go south and the bank had to repossess the place of business, they’d want somewhere easy to re-rent. With this in mind, they generally fund city loans before properties in the country.
The higher-cost but higher-traffic city properties increase exposure to future tenants.
3. Find the Right Mortgage Lender
People who want the best commercial mortgage rates go to commercial-lender specialists. These experts know the industry inside and out, so they can get owners a better rate. Ask potential lenders about their experience when sussing them out.
Choosing the right mortgage lender is important during the life of the loan too. If there are ever any questions or issues down the line, lenders with experience are more equipped to help.
Already have a commercial mortgage but need to refinance? The same principles apply.
4. Bring Copies of Everything
The commercial mortgage process takes what seems like an entire forest of paperwork. Before giving out their money, the bank wants to know everything about the potential borrower. This includes personal documents, as well as some from the business. This can include:
- Life insurance of the borrower
- Business equity
- Proof of income
- Cash payment of 10%
- Proof of an at least 1.15 DSCR
- Documents proving net-worth
- Proof of high credit rating
- And More
Basically, the lending institution can ask for any documentation they want, since deciding someone’s mortgage worthiness is at their discretion. Each lender is allowed to have a different application process.
Bringing all the required documents doesn’t lead to a lower rate directly. However, it shows the bank what kind of borrower they’d be and increases trustworthiness.
5. Decide The Best Loan Type
Before applying for a commercial real estate loan, look at the different loan types. What mortgage will be the best fit for the business? Spend some time researching the types below, then decide which is the best fit.
- Fixed rate loan
- Variable rate loan
- Interest only loan
- Balloon loan
Closing the Deal on Commercial Mortgage Rates
Asking the right questions and preparing is key for finding the best commercial mortgage rates. Banks appreciate consumers who come prepared and know what they want.
Finally, use a lender that shows they care. If the lender expresses interest and goodwill in the business, they’re likely the right choice.
Thinking about a new place for your business? Get a free personalized quote here.