Understanding Commercial Mortgage Loans

Understanding the process involved in obtaining a commercial mortgage loan and the requirements to qualify for the loan are important for a business owner. It can make what once seemed like a very intimidating process less complicated.

When you are considering a commercial mortgage, you need to first decide if you want to get a nonrecourse loan or a recourse loan. The difference is that with a nonrecourse loan the lender can only take back the property in the event of a default but with a recourse loan the lender can require you to pay additional money if the property value is no longer enough to cover the loan balance. Getting a nonrecourse loan offers you, the borrower, additional security that in the event of a default on your loan, you will not be forced to pay additional money that you might not have. It protects your personal assets such as your home, retirement account and other investments that you might have.

Next you will want to consider which type of terms you would favor for your loan. A fixed rate mortgage is very popular because the rate is set and you do not need to worry about future budgetary surprises. Adjustable rate or variable rate mortgages sometimes offer a better interest rate but you are risking a rate increase which could be very unexpected. This can make it difficult to budget for the future and can cause you added financial stress when the interest rate increases.

The final type of mortgage term is called a balloon mortgage. This is more unique than the first two types in its repayment schedule. With this mortgage you only pay the interest each month but no principle. You can pay extra towards the principle but it is not required. But at the end of the loan term you are required to make a single payment, the balloon payment, for the remaining balance of the loan. This can leave you with a huge payment due at the end of your loan. Most borrowers are forced to refinance their mortgage balance when the term is completed to make the balloon payment. But the benefit is that you have enjoyed very low payments throughout the term of the loan.

Getting Your Loan

Finding a commercial mortgage loan can take some time but there are many lenders that you can work with. It is important to shop around for the best rates and terms to meet your current and future needs as a business. So invest the time to find the best lender for you.

Make a Great First Impression

When you are applying for the loan remember that the lender is judging your businesses ability to repay the loan as well as to be successful in your field of business. Taking the time to have your business and personal financial information prepared is critical. This will show the lender that you are very professional, that you are taking the loan process very seriously and that you are prepared both for the application process but also the process of repaying the loan. Making a great first impression will be very beneficial for a successful loan application process.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Important Criteria When Getting a Commercial Mortgage Texas

When you are applying for a commercial mortgage Texas, it is important that you know what lenders are looking for. Knowing this information will help you to get the best possible rates.

As you have learned more about the commercial mortgage Texas process, you learned that your creditworthiness is an important part of the equation. Having a credit score over 680 and having no foreclosures or bankruptcies is a basic must to qualify. In addition, your business needs to be three or more years old to demonstrate stability. But you have also learned that a lender is going to be looking at more than just your business to determine if your request is a good risk. The lender will be evaluating the property that you are purchasing to make sure that it meets certain criteria.

The location of the property can play a big part in getting approved for a commercial mortgage Texas. Lenders know that most business owners will be leasing a portion of the property to tenants to assist in paying the mortgage. Having the property in a large metro area will make it a more desirable location for tenants. Building in remote areas, rural areas or places with poor access are harder to lease. This increases the likelihood of the borrower defaulting on the loan at some point.

Leasing History is Critical

Another factor that the lender will want to investigate is the lease term that could be in place. If there are tenants in the building currently, how long does their lease extend? Having a tenant in place from the previous owner is great but having them locked into a long lease is even better. This is simply another sign that the borrower will have extended income from the property and is likely to have less difficulty in making the monthly payments. In addition to any current leasing information, the lender will take into account any past lease history of the property. Have there been any long term tenants in recent years? Has there been a lot of tenant turnover in the past? Again, the lender is trying to gauge the desirability of the property from a tenant’s perspective. Having a strong lease history is a key factor in securing a commercial mortgage Texas at a great rate. It helps to prove that the property will have a positive cash flow in the future and that the borrower will continue to be able to make the payments on the loan.

Property Condition Counts As Well

Another important factor in how desirable the property is to tenants in the overall condition of the building and the grounds. If the property is in disrepair then it will be hard to sign tenants to a long term lease and even harder to keep them in place. In addition, a property that needs a lot of work can quickly turn positive cash flow into negative cash flow. Repairs and renovations can quickly eat up cash and make it difficult to make the mortgage payments. Knowing what a lenders looks for in a commercial property can help you to select a property which will meet your businesses needs and also appeal to a lender as a solid investment.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Steps for a Successful Commercial Mortgage Texas

Having a plan to follow makes any process easier and that is certainly true for getting a commercial mortgage Texas. These steps will help you to determine a time line and know what to expect as you complete the process.

The first step in securing a commercial mortgage Texas is finding the best lender to meet your needs. You will want to speak to several lenders and gather information before you make your selection. If you have a strong relationship with your bank then this can be a good place to start. You might also want to research online which lenders provide the most loans in the price range that you are planning to spend. Selecting a lender who is accustomed to financiering loans of a certain dollar amount is wise. This means that every step of the process should be well documented and from application to approval the process should run smoothly. You can also speak to a broker for a recommendation.

Once you have selected a lender, then you are ready to begin the application process for a commercial mortgage Texas. There may or may not be a fee for the application process and that will depend on the lender that you have selected. Most lenders will require that you submit financial statements including business and personal records from the last three years. Some specific documents would include operating statements, tax returns, bank statements and net worth statements. When you speak to the lender they should be able to provide you with a detailed list of the documents that they will require.

Once you have submitted your documentation, the lender begins the evaluation portion of your commercial mortgage Texas. Using the financial information that you provided they calculate the likelihood of you being able to make the payments on the loan on a regular basis. While this process is underway, another group will be conducting a background check and credit check.

Property Evaluation is the Final Step

The lender will set up a property appraisal, which you will be paying for, to determine the current value and condition of the property. They will also research the title of the property to be sure that it is clear and able to be transferred. You will also need to pay for an environmental inspection of the property. This is to make sure that the soil is not contaminated and that there is no health risk or danger. Once all of the inspections are completed, all of the findings will be evaluated as a whole to determine if you will be given the loan.

Completing the Loan Agreement

If you are approved for the loan then you have one more round of paperwork to face. It is best that you involve a lawyer who specializes in commercial loan documents. They can review the document for you and be sure that the terms are correct and that you understand the contract prior to signing it. If you have any questions about terms that you do not agree with, then your lawyer can return the contract and request that changes be made. Once both you and the lender agree on terms, you sign the contracts at the closing and also make the down payment. Funding will typically be available within a few days of the closing.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Getting the Best Terms on Your Commercial Mortgage Texas

When you are seeking a commercial mortgage Texas, it is important to understand the criteria that the lender is looking for to determine your creditworthiness. Meeting or exceeding these requirements can afford you much better terms from a convention lender.

Applying for a commercial mortgage Texas is a process that requires time, planning and also the payment of some nonrefundable fees. You will want to be sure that you understand the requirements to qualify for a loan before you submit your documents to avoid wasting time and money. A lender is going to require documentation to verify your credit rating, liquidity, net worth and the value of the property that you are going to purchase. All of these factors will help the lender determine if you are a good risk and if they are willing to loan you the money.

In general terms, to qualify for a commercial mortgage Texas, you should have a credit score of over 680 and have no foreclosures, bankruptcies or tax liens on your recent credit reports. Your business should also be three or more years old. If the business does not meet these criteria, then you should expect to be asked for your personal financial information. As long as you have good credit and are financially stable, then the lender would ask you to provide a personal guarantee on the loan. This means that if the business fails or you close the business for any reason, you would still be personally responsible for repaying the loan.

Aside from the financial health of your business, the next most important piece of information is the actual property that you want to purchase. This is the property that will be the collateral for the commercial loan. With that in mind, the lender wants to be certain that the property will retain its value for the entire life of the loan. This is the lenders safety net in case you default on the loan. The lender would then foreclose on the property and sell it to recover their money. Because commercial property values can fluctuate rapidly, the lender for a commercial mortgage Texas will want you to make a substantial down payment to ensure that you have instant equity and also to be certain that the property value remains greater than the balance of the loan.

Negotiate for Good Terms

When you begin to speak to lenders you will want to ask for a list of all fees that they charge to process a commercial loan application as well as all of the fees associated with processing an approved loan. You will also want to negotiate the best interest rate that you can. Making a larger down payment can often reduce your interest rate by as much as a full point. Having all of these numbers will allow you to calculate the total amount that the loan will cost you.

Select the Best Loan

Once you have determined the actual cost of each loan option, you will want to determine which lender best meets your needs. In most cases you are looking for the lowest cost but there can be other factors. You might be looking for a longer term and be willing to pay a little more interest over the course of the loan to have more time to make payments. The lower monthly payment could be more critical to you than the total cost of the loan. With your research complete you need to select the lender and the loan that best meets your needs.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage

Texas Commercial Mortgages: Billions at stake due to Hurricane Harvey

Hurricane Harvey puts many securitized commercial mortgages in Texas at risk.

Moody’s claims some 1,500 properties may have been impacted by Hurricane Harvey amounting to 19.4 billion in outstanding CMBS loans. The number of CMBS financed properties at risk varies with each analysis. Competing methods of analyzing the storms damage to investors’ portfolios have emerged. One method is to consider the wider area impacted by the storm, the other is to consider the areas that were more acutely impacted.

One method of analyzing the damage is to consider properties in the disaster area declared by Governor Gregg Abbott. The area includes 54 counties and reaches as far as San Antonio. An opposing approach is to consider the disaster area declared by FEMA, an area encompassing some 33 counties. The first approach gives a broader sense of the storms potential impact on CMBS properties, while the second offers a more clinical assessment.

In the state declared disaster area there are about 1,200 CMBS loans amounting to 15.1 billion dollars that could be impacted by the storm. These loans are not government sponsored, and therefore, pose a higher credit risk to investors. Retail properties have the highest exposure among these loans. Making up 32.9 percent of the total, or 5 billion dollars, of the outstanding CMBS loans.

Considering the areas impacted according to FEMA the number of CMBS loans at risk is smaller, but the overall impact remains the same. In the 33 counties declared “disaster-areas” by the agency there are 900 non-government sponsored CMBS loans, amounting to a balance of 12.2 billion dollars... Retail properties again face the greatest exposure, making up about 30.1 percent of the total.

It will be difficult to directly quantify the impact of Hurricane Harvey on the CMBS market and Texas commercial mortgages in the short term.

Whether analysts consider the broader area impacted by Hurricane Harvey or the areas more acutely impacted the extent of the damage to the CMBS market will be difficult to estimate in the short term. The damage to each individual property will have to be assessed.

What is clear from both overviews is that retail makes up the largest share of CMBS loans potentially impacted by the storm. The performance of these loans in the future will largely depend on how the local economy recovers and whether these retailers will be able to retain their customers.

In the long term securitized commercial mortgages in Texas will continue to face risk from natural disasters.

Simply put CMBS lenders don't underwrite the potential cost of natural disasters. Therefore the market will always face exposure when disasters like Hurricane Harvey take place. Flood insurance, FEMA assistance and the willingness of private insurers to underwrite risk encourages development in disaster prone areas, in Texas and throughout the nation. Insurance may repair the damage caused by these disasters on the surface, putting some investors at ease. But the damage Hurricane Harvey inflicted on the local economy remains unclear. With retail properties facing the greatest exposure, the greatest risk to CMBS loans is not superficial damage that can be repaired, but Harvey's long term damage to the local economy and whether retailers can secure customers in areas where the population is displaced.

Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC  Private Hard Money Lender
Arizona Tel:  (623) 582-4444
Texas Tel:      (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701

About the Author:  Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.

Technorati Tags: commercial loans,commercial lending,commercial mortgage