With all the uncertainty in the current residential mortgage market, now is a great time for brokers to consider working with non-bankable borrowers looking for small-balance commercial mortgages. However, many residential brokers are hesitant to get involved in this industry as it’s perceived as too difficult. This simply isn’t the case.
Here are several myths about small-balance commercial mortgages and why they aren’t true:
Commercial deals are difficult to find.
Many residential brokers believe they won’t be able to find borrowers who need small-balance commercial mortgages. The truth of the matter is that some of your borrowers could be self-employed and in need of commercial financing. Additionally, the same sources you use to seek out residential borrowers are bound to know many small business owners looking for a commercial mortgage. For more on this, read our previous post: Four Ways to Build Successful Relationships with Commercial Mortgage Borrowers.
The process is difficult and time-consuming.
If you’re closing traditional, large-balance commercial mortgages, the process can be somewhat complicated. However, when you’re working on small-balance loans, it’s generally much simpler. Most lenders only need a basic application, a credit report and a loan submission summary to get started, and many of these loans close quickly.
It’s tough to place these loans.
Placing small-balance commercial mortgages is only difficult if you don’t know any nontraditional lenders. It’s important to find experienced lenders who specialize in small-balance commercial deals. Once you’ve found these lenders, the process becomes much simpler. Read our previous post on working with non-traditional lenders.
Brokers can’t make money closing these loans.
Many brokers assume that small-balance commercial mortgages aren’t profitable and that they won’t make enough money to justify the time they’ve spent working on these loans. The fact of the matter is that because this industry is less regulated than the residential side, it’s actually easier for brokers to earn higher commissions.
Small-balance commercial mortgages are a simple way for residential and commercial brokers to expand their product offerings and earn additional income. This growing market offers brokers the opportunity to close more loans and increase their business without being too difficult or time-consuming. With a little extra effort, you can begin closing small-balance commercial mortgages and increasing your income. Read more in our previous post highlighting some of the differences between brokering residential and commercial mortgages.