If you’re a residential broker looking to increase your business and income, adding small-balance commercial mortgages to your product line is a great option. However, before you begin working with the borrowers who need nontraditional, it’s important to understand the differences between the residential industry and the commercial industry. Here’s what you need to know:
The rates are higher.
Whether you decide to work with bankable or working with non-bankable borrowers, the rates will be higher than residential mortgage rates. It’s important to be aware of this fact and to be honest and up front with your borrowers about the rates they can expect.
The application process is simpler.
Because of less regulation on the commercial side of the industry, many lenders will need less documentation to begin the underwritinFor example, a small-balance commercial lender like APEX only rg process, particularly nontraditional commercial mortgage lenders. equires a basic application, such as a 1003, a credit report and loan submission summary.
The loans close more quickly.
Residential mortgages and traditional mortgages generally take several months to close because of the regulations and guidelines in those industries. Because nontraditional lenders are less restricted, they can underwrite deals thoroughly and close them in a much shorter time-frame.
You can earn a higher commission.
The residential industry is highly regulated, and that includes the fees brokers can charge for each deal. Brokers who choose to close small-balance commercial mortgages for non-bankable borrowers have the opportunity to earn higher fees.
The small-balance commercial mortgage industry offers brokers the opportunity to expand their current line of products and allows their companies to thrive. The mortgages are a simple way to increase your income, leaving you with plenty of time to focus on your residential business or on bringing in even more commercial business.