A non-bankable borrower comes to you with a request for commercial financing. As a broker, you get the process started by completing a 1003 or personal financial statement with the borrower and pulling a tri-merge credit report. This will give you most of the important information a lender needs, but there are a few questions you must ask your borrower before contacting a small commercial mortgage lender.
- When did you buy the building, and what did you pay for it?
This question is necessary to determine how much your borrower has invested in the property, financially as well as personally. Most lenders will want a borrower with some skin in the game, and it’s tough to approve a loan if they haven’t invested much.
- What do you want to do with this loan, and what are your plans for the building?
You need to understand the purpose of the loan, or your lender is likely to lose faith in you as a broker. Every lender is going to want to know what kind of plans the borrower has, and the deal needs to make sense to the borrower, the broker, and the lender or else it won’t work.
- Why have you had credit problems in the past?
Small commercial mortgage lenders catering to non-bankable borrowers know that their customers won’t have pristine credit, but you need to be able to explain a less than stellar credit score and any late payments.
- For purchases, where is the down payment money coming from?
Commercial mortgages require a 20-45% down payment depending on the property and the buyer’s experience. The down payment needs to be real money that belong to the borrower. No gifts of equity.
The answers to these four questions are very important to a small commercial mortgage lender when deciding whether or not to finance a deal. Make sure you take the time during your initial interview with the borrower to ask these questions and to get to know their situation. Having the answers the first time a lender asks you these questions will give you credibility as a broker and will help you to get your borrower the loan they need.
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