While many commercial mortgage brokers and originators have done well throughout the current refinance boom, it can’t last forever, according to an article published by Mortgage Professional America last week.
“When rates go up refis will absolutely take a hit,” said Tom Hutchens, senior vice president with Angel Oak Mortgage Solutions.
While an interest rate increase is expected, it remains to be seen when it will take place. Market volatility has encouraged the Federal Reserve to maintain its benchmark rate, keeping mortgage rates at historic lows. However, many pundits are speculating that an increase may come in December or early 2016.
Although refinances are currently a major source of income for originators and mortgage brokers, now is a great time to expand your product line to include small-balance commercial mortgage loans. Within the community of homeowners and buyers you currently serve are borrowers seeking financing for many commercial property types.
Unsure of what you need to submit to a lender to begin closing a commercial mortgage? Here are the basics:
A completed 1003:
Just like banks and other traditional lenders, a small-balance commercial lender will need you to submit an application in order to evaluate your borrower’s request for financing. At APEX, a completed 1003 should be submitted.
A detailed use of funds:
You should also prepare a loan submission summary which should explain in detail how your borrower plans to use the money. Include information about your borrower and their business, as well as specifics about the property itself. Non-conforming commercial lenders need all of this information when making a financing decision.
A credit report:
Another important tool that lenders use when deciding to approve a financing request is your borrower’s credit. You need to provide a recent credit report with trade lines so that your lender gets an accurate picture of your borrower’s credit history. Keep in mind that the free online reports are not accepted by many lenders and are difficult to read. If these free reports do include scores, they are normally higher than the scores in the standard Experian and Trans Union reports used by a majority of lenders.
Photos of the property:
A picture is worth a thousand words. The applicant may have great credit but if the collateral does not fit into a lender’s program, for either use, condition or both, there is no deal to discuss.
While residential mortgage brokers have plenty of business thanks to this refi boom, once rates go up it’s hard to tell how long the boom will last. Remember that in addition to homeowners and buyers, there are borrowers with various commercial properties who would benefit from your experiences as a mortgage broker. Expanding into small-balance commercial mortgages will not only increase your income as a mortgage broker, the diversification will also strengthen your business.