In this month’s Scotsman Guide, they discussed the Five C’s of underwriting small balance commercial mortgages. Each of these factors is crucial for a lender in determining whether or not to grant a financing request. While most of these elements are fairly easy to quantify (a credit score, the value of a property), character proves to be an interesting challenge. Brokers should be conscious of this and do their best to determine the character of a borrower before submitting a small-balance commercial mortgage request.

Why your borrower’s character matters:

Character is important regardless of the lender to whom you’re submitting the request, but it takes on a particular level of significance when you choose to work with non-conforming commercial lenders. These story lenders are willing to work with borrowers who have had past financial problems, but they need to understand the nature of the borrower. This is especially important if you’re working with a lender who has ownership of their loans. You may be finished working with the borrower once the I’s are dotted and T’s are crossed at the closing table, but your lender isn’t.

How to determine your borrower’s character:

It’s not always simple to understand your borrower’s character, but there are ways to gain a better grasp on this intangible factor. You need to ask your borrower questions to discover the nature of past financial problems and how they handled them. It’s also crucial to encourage honesty from your borrower throughout every step of the lending process.

It’s important to develop an understanding of each borrower’s character when considering a small-balance commercial mortgage request. This will allow you to determine whether your borrower will qualify for financing and will demonstrate to your lender that you take each request seriously and understand the commercial mortgage industry. Read more in our previous post about how the borrower’s character affects the lending process.

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