Adding small-balance commercial mortgages to your product offerings is a simple way for residential brokers to expand their business and increase their earnings. While working with borrowers who need to obtain loans for commercial properties is simple, there are some common mistakes that all brokers should try to avoid.
Promising your commercial borrower residential rates:
One of the biggest mistakes brokers new to the small-balance commercial industry make is assuring their borrowers they’ll be able to get a specific rate. If your borrower doesn’t qualify for a bank loan, don’t promise them rates comparable to those a bank can offer. This will only disappoint your borrowers, erode their trust in you and make it more difficult to sell the rate for which they qualify.
Submitting an incomplete application:
It’s a good rule of thumb to find out what your lender will need to review a small-balance commercial mortgage request. If the application you submit is lacking necessary elements, you’ll be wasting your time, your lender’s time and your borrower’s time trying to collect the missing documents. Read more in our previous blog post about why lenders turn down commercial mortgage applications.
Sending in a credit report without trade lines:
While your borrower’s credit score is important, a lender can’t make a financing decision based solely on this number. In order to get a clear picture of your borrower’s credit history, a lender needs a credit report with trade lines. Submitting a credit report like this right away will save you time and will allow your lender to make an informed decision about your borrower’s financing request. Learn more in our previous blog post about the importance of credit in the lending process.
Ordering the appraisal or title work:
Before you order an appraisal or title work, talk to your lender. Most small-balance commercial mortgage lenders use only their approved appraisers, as well as specific title insurance companies they work with frequently, and would prefer to handle this aspect of the mortgage process themselves.
Working in the small-balance commercial mortgage is a great way for brokers to increase their business and the number of loans they close. However, it’s important to avoid the mistakes above in order to reach your full potential as a commercial mortgage broker. At the end of the day, it comes down to paying attention to the details, being honest with your borrowers and making sure you understand your lenders’ guidelines.