Commercial mortgage basics – Types and required documentation
You need to take out commercial mortgages when you’re planning to purchase business/commercial properties like retail outlets, office buildings, healthcare facilities, etc. Juts like a home loan, you need to pledge collateral in order to obtain a commercial mortgage.
Types of commercial mortgages
Commercial mortgages can be primarily divided into 2 types, which are given below.
- Fixed rate commercial mortgage – The interest rate remains fixed until the mortgage loan is fully amortized, that is, throughout the loan term. You can take out this loan and fix the interest rate at the time when the market interest rate tends to increase.
- Variable rate commercial mortgage – The rate of interest fluctuates periodically during the loan term. If you’re planning to take out this loan, then you should enquire how often the interest rate will change. Usually, in these types of commercial mortgages, the interest rate remains fixed for a certain period and then it starts fluctuating depending on the current market rates.
Required documentation
Your lender will require the following documents in order to process your loan application.
- Your SSN (Social Security Number)
- Your credit score
- Your contact details (Name, address and telephone number)
- Personal tax returns, business tax returns and W-2/1099 for the past 2 years
- Bank statements for the last 2 months (IRA, retirement funds, 401(k), etc.)
- Paystubs for the past 30 days
- Payment history for the past 12 months
- Information about mortgage payments and the rental properties owned
The required documentation varies from one lender to the other; so, it is advisable that you at first enquire and then supply the necessary documents to your lender.
Qualifying criteria
Lenders usually judge you by 3 factors when you apply for commercial mortgages. The factors are listed below.
- The collateral
- The cash flow
- Credit and income of the borrower/guarantor
The lenders often consider the financial status of your business before approving your loan request. It is one of the prime criterion and the lenders want to assess whether or not your business is stable and profitable. The terms of the commercial mortgage loan largely depends on the type of your business and the type of real estate you’re planning to purchase.
It is advisable that you calculate your affordability before obtaining a commercial mortgage loan. This is because your lender can initiate foreclosure proceedings if you’re not able to pay back the loan on time. Therefore, before taking out commercial mortgages, check out whether or not your business has enough liquid funds to repay the loan within the stipulated time.
Useful sites:
Mortgage Brokers Melbourne – Check out Mortgage Brokers Melbourne for more information.
Commercial hard money loans – Commercial hard money loans are available under the roof of Blueh2ofudning.com for your benefit despite your poor credit score and loss of value on your commercial property. The procedure at Blue2ofunding involves less complications and efforts on the borrower’s part.