Closing small-balance commercial mortgages is a quick and easy way for brokers to increase their income. However, in order to close these loans, you need to understand the borrower’s you’ll be working with and the challenges they’ve faced. Being able to tell whether your borrower will qualify for bank financing or whether they’ll need an alternative product is important.
Here are a few clues that will let you know if a commercial mortgage borrower is non-bankable:
They’ve had credit issues in the past.
Because of stricter regulations, banks and other traditional lenders have a fairly narrow credit box, which disqualifies a lot of commercial borrowers right out of the gate. If your borrower’s credit score reflects the fact that they’ve hit a few financial bumps in years past, you’ll need to work with a small-balance commercial lender that’s willing to consider your borrower’s full financial picture, and not just their credit score.
They have past-due taxes.
Banks won’t lend to borrowers who owe the IRS. If you’ve got a borrower looking to secure a mortgage to pay off back taxes, you’re going to need to direct them to a non-conforming lender.
They own a unique property.
Most traditional lenders have a number of commercial property types that they won’t lend on for any number of reasons. It’s in your best interest as a broker to develop relationships with lenders that will finance a variety of commercial properties.
They need a small-balance mortgage.
Borrowers seeking smaller commercial mortgages are likely to hit a wall with banks and many other commercial lenders, particularly if they need a loan size under $1 million. That’s why brokers who are in the business of closing commercial mortgages should find at least one lender who specializes in small-balance commercial mortgages.
For brokers looking to earn more and increase their business, small-balance commercial mortgages are a great option. Borrowers in need of this financing will often have had past credit or tax issues, a unique property type or a smaller loan for their property. Once you know how to spot the borrowers who will need alternative financing, cultivating leads and getting loans closed will be much simpler.