What kind of loan submission does a commercial lender want to review?
What kind of loan submission does a client expect to be prepared?
Lenders want enough information to know that the loan on which they will issue a letter of intent (LOI) will actually work. Lenders do not want to work on stuff that will go nowhere, not with all the work involved in completing a commercial real estate mortgage loan.
Clients expect that the broker they hire to assist them in getting funding will actually do some work on their behalf, more than just making a few phone calls or faxing a cover page with a tax return to a lender and asking 'do you think this will work?'
This is why it is so important that commercial mortgage borrowers work with experienced people in commercial mortgages. Whether they go direct to a lender, or work with a mortgage broker, they need to work with someone experienced.
The trend today is for residential mortgage people (whether a broker or banker) to attempt to work on commercial mortgages. Right now the low-hanging fruit in residential lending has dried up, so now some residential people feel they can supplement their income with commercial mortgages - an entirely different loan product and process.
Commercial lenders are going crazy with the foolish calls and faxes from residential people attempting to get a commercial mortgage loan on the most unqualified of borrowers or properties.
A true commercial mortgage broker, like
myself and about 500 others nationwide, have a much different
process.
My philosophy is to remove as many items of uncertainty as possible up front, before the loan even gets to the lender for an initial review. That's what the retainer fee is for, for my time and effort and expense in working up a file and spreading the numbers so that my submissions to the lender are the best they ever get.
Using this process, the borrower sees that I'm actually working the deal instead of just faxing a few things all over the world, we're earning our money, and the lender loves to take my calls and packages because they know I'm not sending them 'if-comes,' deals that might not work, deals where there remains a whole lot of uncertainty.
Usually lenders remark "I wish all our loan packages look like this."
This is why guys like me require so much
information up-front. That is why we need their personal returns for at least two years, business returns, affiliated returns, property leases, operating income statements, credit reports, personal financial statement, and any property information available like old appraisals, environmental reports, tax bills, assessments, digital pics, etc.
It takes a few days upon receipt of all this to work up a file and structure a deal with recommendations and get it out for bids, but what is the result? The lender has a clear understanding of the deal and its viability. The Letter of Intent is solid, and the borrower's qualifications are already known, if not already underwritten. A huge amount of uncertainty is gone.
The advantage to the client, the borrower, is that any interest shown by a lender is serious. Plus, true commercial mortgage brokers have access to many, many more lenders than the borrower even knows exists, who the borrower would not even have a chance to talk to, and access to terms that may not be available locally.
