What Commercial Mortgage Lenders Look for When Qualifying Borrowers

For those in the property investment business, there is a vast difference between the guidelines for residential mortgages and those for commercial mortgages. While residential mortgage lenders look at credit score, the amount you are using for a down payment, and supporting income to keep up with payments, commercial mortgages look at many other factors. To make things easy and less confusing, the team at CounselPro Lending has put together some concrete guidelines that commercial mortgage lenders look for when qualifying borrowers.

Property Location

Location is, and will always be, one of the most important considerations for lenders and buyers alike. In the case of commercial mortgages, lenders prefer to see properties in large urban and metropolitan areas. The reasons for this are many, but they all come back to high visibility and the ability to generate revenue.

Credit Ratings

Most commercial mortgage lenders are looking for candidates who have credit scores at or above 680. The higher the better.

Down Payment

Commercial mortgage lenders want borrowers who can make a down payment in the range of 20%-25%. If the property is owner-occupied, then there are other down payment options available.

Qualifying Income

Commercial mortgage lenders need to see that the property you are purchasing has the cash flow necessary to service the debt.

Established Tenants

Existing tenants on a commercial property work in the borrower’s favor. Commercial mortgage lenders like to see that a property is already generating revenue. Within the realm of tenants, lenders like to see potential staying power, which is why a property that is being used by a chain restaurant, franchise, or nationally-recognized brand is more desirable than a generic establishment that may go out of business in the near future.

Occupancy History

Commercial investment properties diverge from residential investments when it comes to occupancy history, as well. Commercial mortgage lenders like to see long-term leases, a history of stabilized occupancy, and low turnover.

Condition

What is the current state of the property? When was the last time it had any major renovations? How frequently has it needed repairs over the past few years? Lenders want to know these things, and you should to, in order to avoid investing in a money sink.

Your Finances

As a commercial property investor, your finances are going to become a point of interest. Lenders are going to want to know your net worth, cash liquidity, and if your loan leverage.

Property Management Experience

Commercial properties require more attention than most residential properties. Borrowers need to pay attention to general upkeep and maintenance, meeting the requirements of tenants, and occasional mediation. Commercial mortgage lenders want to know that you have some experience managing properties, and possibly even an understanding of landlord-tenant laws as they pertain to commercial leases.

Talk to the Experts

At CounselPro Lending, we provide funding solutions for commercial properties of all shapes and sizes. Whether you are looking to acquire a new property, make renovations, or start new construction, our team will work with you to create a strategy that fits your needs. Contact CounselPro Lending today to learn more.

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