For the past two years, Americans have viewed real estate as the most valuable long-term investment, beating out stocks and mutual funds and even gold, according to a National Mortgage Professional report.
The article cited a new Gallup survey, in which 31 percent of respondents chose real estate as the best possible long investment. While the number is a slight dip from last year’s 33 percent, it’s clear that most Americans view owning property as a sound investment. Small business owners are no exception, which is why it’s important for commercial mortgage brokers to understand how to help potential borrowers best finance this crucial investment.
If your borrower is purchasing a commercial property:
For small business owners, purchasing a commercial property is an important decision and it’s critical that you present the loan scenario to small-balance commercial lenders in a professional and thorough manner. Be sure to include details about the collateral itself, your borrower’s credit history and the reason they’re looking to purchase the building. You’ll also need to provide the lender with proof of funds for the down payment as well as an agreement of sale for the deal to move forward. It’s also important to discuss your lender’s down payment minimum requirements with your borrower. Unlike residential purchases, prospective commercial property buyers should be prepared to put down as much as 40 percent of the purchase price, depending on the property type.
If your borrower is refinancing a commercial property:
As with a purchase, you’ll need to provide your lender with information about the building and your borrower, as well as your borrower’s plans for the money. There are many reasons a borrower may want to refinance their property – paying off debts, working capital, improvements to the property – so be sure to be as specific as possible when discussing why your borrower needs a small-balance commercial mortgage.
As a commercial mortgage broker, it’s your job to guide your borrowers through the lending process and to help them obtain the financing they need. Remember to include all relevant information and documents, such as a 1003, recent credit report and loan submission summary. Above all, whether your borrower is looking to purchase a commercial property or refinance an existing property, it’s important to remember throughout the process that this commercial real estate is an important investment for your borrower.