Buyers get into mortgage loans without clearly understanding the terms of the contract and underwriting criteria used by the lender. This, in turn, adds a strain to their investment and becomes a major cause to a lost deal. It’s important to know how the lender assesses the risk of the project, what they require of you as the sponsor and how their lending guidelines satisfies the ultimate terms of the loan.
If you are hiring a commercial real estate broker for this project, below are some of the questions to ask them before tabling any deals and contracts:
- How many loan options are available and which are suitable to your circumstance? Mortgage lenders provide different loan products such as FHA/HUD (Federal Housing Administration/Housing and Urban Development) loans, construction loans, bridge loans, conventional loans, or Freddie Mac (Federal Home Loan Mortgage Corp.) loans. If a mortgage broker has all these options available, there is a good chance of getting a good deal other than dealing with one who only has one product to offer.
- Find out from your commercial real estate broker the lender’s basic terms of your loan, interest rates, and repayment terms. You may also want to know if the lender needs personal guarantee or if the loan is non-recourse. The prepayment penalties in case refinancing or sale occurs before end of the term and the time it takes to close a deal once an appraisal has been ordered. This helps both you and your real estate agent to know how many days it takes for the money to be available during transaction discussions.
- A commercial real estate broker should be able to give you information on how much balance you need to have in your account for your interest payments or whether the lender requires you to bank with them as a loan condition. They should also share the lender’s definition of asset for a conventional loan to see if there is a possibility of qualifying for it.
- When you know what to expect from a mortgage lender, you can weigh your chances on being approved for a loan. Your commercial real estate broker is also in a position to professionally advise you on the loopholes, advantages, and disadvantages of different lenders and what to most likely go for.