Commercial mortgage brokers can face a number of objections from non-bankable borrowers throughout the lending process. However, many of these issues will cease to exist – or at least be easier to manage – if you simply prepare your borrower for the type of loan they can expect to qualify for.
Here’s how to get your borrower ready:
Generally, the biggest complaint that brokers hear from their non-bankable borrowers is that a nonconforming lender’s rate is too high. It’s important to explain to these borrowers that commercial rates overall will be higher than residential rates, as well as the fact that the rates a nonconforming commercial lender can offer will be higher than bank rates because they’re taking on more risk.
Brokers should prepare their non-bankable borrowers to discuss their credit history and any past issues they’ve faced. While nonconforming lenders aren’t subjected to the same strict credit guidelines banks follow, the underwriters will need to understand your borrower’s credit situation in order to determine whether they can help.
It’s also important to ready your borrowers for the cost of a commercial appraisal. These reports are going to be more expensive than a residential appraisal, and it’s important to explain this to your borrower before it becomes an obstacle.
It’s important for brokers to understand a lender’s seasoning requirements and to explain them to borrowers. Nonconforming portfolio lenders in particular need to know that a borrower has invested time and effort into a property before they are comfortable financing their commercial mortgage request.
Non-bankable borrowers have options, and it’s up to brokers to prepare them for the loans that they’ll qualify for. Make sure to discuss the rates that non-bankable borrowers can expect, any past credit issues they’ve dealt with, the cost of a standard commercial appraisal and any seasoning requirements your lender has. Having these conversations early in the lending process will save time and will allow closing to go more smoothly.