Getting the best competitive mortgage terms is a critical part of getting commercial property loans. Before doing anything, you must decide what you want the loan for and how you plan to use it. For instance, do you wish to buy an office space to work out of? If yes, you must figure out what real estate you want and put it under a contract. Do you wish to build a new multifamily property? If yes, you must create a plan, from securing the land to finding the right contractor. You need to have a clear vision of what your end product will look like.
Research The Property
Just because you find a property attractive doesn’t mean your real estate lender will. The more time you spend researching the property and its area, the more likely you will convince your lender that it’s a sound and safe investment. You must have this information to help you decide what type of commercial property loan you need and convenes a lender to approve your competitive terms.
Once you clearly understand where your loan money will go and what size loan you need to complete the project, you can move to the next step.
Finalizing a Financing Option
In most instances, you will select from one of the following types of commercial property loans:
- A real estate construction loan is generally a shorter loan term lasting anywhere from one to two years. Most investors get this loan to build their property and then refinance after the construction is complete.
- A purchase loan is designed to help you purchase a real estate property. These loans tend to come in large amounts and offer longer repayment terms of up to 20 years. These loans are also referred to as mortgage loans.
- Next comes to refinance loans. You may already know how refinancing works with personal loans, which is similar to commercial real estate. By refinancing, you can lock in lower rates and monthly payments.
- Hard money loans work best for investors who plan on flipping the property. These loans generally come with a higher interest rate and a shorter loan term than other commercial property loans and are only accessible via private money lenders.
Your loan rates and terms will depend on what kind of financing you select. The loan you want will generally limit your overall choices for lenders since most real estate lenders offer only a few types of commercial property loans.Â
Finding the Right Lender and Securing the Right Loan-Term
Now that you know what kind of loan will give you the best terms, you are ready to find a real estate lender who will provide you with your desired loan. Of course, finding the right lender is not always as easy as selecting one that looks best for you. Credit unions and banks generally have stringent lending policies, which means you must meet specific qualifications to get a loan. Most commercial lenders will look for the following factors when evaluating your overall creditworthiness:
- Business credit score
- Personal credit history
- Coverage ratio
- Annual revenue
- Debt-to-income ratio
However, the lender will not just look at you when it comes to commercial real estate loans. They will also like to see the following for your real estate:
- Purchase price
- Property type
- Operating statements
- Rental income (if applicable)
- Loan-to-value ratio
So as you evaluate your potential real estate lenders, ensure you pay attention to how they will assess you. If you keep all these things in check, you will receive competitive mortgage terms for your next commercial real estate loan. Another way to secure competitive terms for commercial property loans is by saving up for a significant down payment. When you make a small down payment on your property, the lender will consider you a risky borrower compared to someone ready to make a significant down payment.
While earning extra income to put in your debt is one way to deal with the situation, cutting down expenses may be another way to get things done. Lowering your DTI will help you get the best commercial property loan rate possible. Decreasing your debt-to-income ratio will also help you get the terms you need.
Contact Real Estate Funding Solutions To Find An Ideal Commercial Loan For Your Purchase!
If you are planning on purchasing a commercial property anytime soon, we suggest you get in touch with our team from Real Estate Funding Solutions right away! Our team will speak to you about your project and help you determine which kind of loan will give you the most competitive terms. Our team will also help you review the terms of your loan and help you decide if it’s the best way to go forward with your purchase. Call us at 855-913-8637 if you need any information related to commercial real estate loans.