If you’re a residential mortgage broker passing on the occasional commercial deal, you’re losing money. Working with borrowers in need of small-balance commercial mortgages is a great way to offer an additional service to your residential clients who own commercial property, as well as increasing your income. The trick is to make the process of closing these loans as simple as possible so that you can remain focused on your residential business.
Here are some tips to get you started:
Select the right commercial mortgage lender.
Choosing a lender that fits your needs and the needs of your borrowers is crucial. Make sure the lending partner you choose is a direct lender. If possible, work with a bank-owned or affiliated lender, as they tend to offer more protection than an independent lender. Avoid lenders that require upfront fees as this will help you to avoid expenses without results. It’s also a great idea to speak with other commercial mortgage brokers to understand the experiences they’ve had with various lenders.
Understand your borrower’s needs and credit history.
Like a residential mortgage, your commercial borrower’s credit and income will be factors in the terms a lender will offer. Make sure that you understand the kind of rates and terms that will fit your borrower’s needs and qualifications. Keep in mind that hard money lenders aren’t the only alternative for non-bankable borrowers. It’s important to seek out small-balance commercial lenders with flexible terms and an understanding of the obstacles that small business owners face.
Make sure you can still focus on your residential business.
Offering commercial mortgages is a great way to increase your income, but you still need to be able to handle your day-to-day residential mortgage business. Find a lender who will handle the processing of each of your commercial deals, leaving you with time to concentrate on closing residential mortgages.
Understand your earning potential.
Different commercial mortgage lenders offer different benefits, and it’s important for brokers to understand them. Look for commercial lenders that offer yield spread, as this will help you to keep closing costs low while increasing your ability to earn more on each deal. You should also make sure that your lender protects your fee in their commitment letter.
It’s easy for residential brokers to turn down small-balance commercial mortgages simply because they aren’t residential loans. However, closing these deals when they come across your desk is a great way to maximize your earning potential. By following the tips above, you can increase your income without too much additional effort