When many of our clients first come to us they have only one thing in mind: rates, RATES, RATES! However, in commercial lending rates make up only a very small portion of your lending satisfaction. The disconnect, it seems, is that commercial lending is extremely different from residential – aspects of them are common but they are far from being the same (think: a motorboat vs. a sailboat, a condo vs. a tenancy-in-common, or a 3 unit multifamily property vs. a 16 unit multifamily property).
Coming from the residential perspective, many borrowers tend to seek lending rates/terms from the internet. As you all know, being informed is the key in commercial lending but websites such as BestRate.com, loanPage.com, BankRate.com only give potential Borrowers half of the story. The reason is simple: lenders know that you are doing rate comparisons so the only chance they have to grab prospect borrowers’ attention is by posting the lowest rates possible. But those “best” rates will only apply to borrowers and loans that meet the highest of underwriting standards – standards that differ from lender to lender depending on the risks that the lender is willing to take. The posted rates from those websites may not apply for a multitude of reasons: if your credit is less than perfect, if you cannot fully document your assets and income, if you have only a few properties and management experience, or if you own too many properties and your income is fully from investment properties. I looked, but I could not find the fine print where underwriting standards were set out on these pages.
In a market like this, the examples of lenders advertising one “best” rate but actually coming to the table with something completely different are all too common. Recently, one client came to us after he had been lured in with a quoted rate of X on a one million dollar loan only to be told that, based on undisclosed underwriting guidelines, they could not give him that rate and he had a choice: the rate would be X plus 3% or the loan would be $750,000. Another example was a client of ours that came to us after having been denied a loan because the lender (unbeknownst to her) added 5% to all of the actual expenses – again, she was given the choice: increase the rate or decrease the loan amount.
Knowing these underwriting guidelines is key to a smooth approval and closing process. This is where a licensed mortgage broker changes the game. We know the underwriting guidelines. We know which lender will assume a higher interest rate when calculating the debt service coverage ratio and which one will assume the very worst and add 10%.
But even then, not all mortgage brokers were created equal. So when is time to choose your business lending partner, getting just a rate quote is not enough. You should:
> MAKE SURE that they are able to describe to you the different possibilities and lending programs.
> MAKE SURE that they understand the underwriting guidelines that the lender is requiring for your loan and that YOU meet their lending requirements.
> MAKE SURE that before they provide you with a rate and term that the lender had actually the chance of reviewing your documentation. It is very easy to quote rates but you do not want people “flowering” you with numbers.
Global Funding Partners stands out because we know underwriting guidelines. We will find the right loan for you and do our best to get it approved on the first attempt. We will help to take the anxiety out of closing. And we always strive for your happiness because WE WANT TO BE YOUR BUSINESS PARTNER FOR LIFE!
Nicole Kayes, MBA
Global Funding Partners
Ph: (415) 474 7786