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When to Turn Down a Small-Balance Commercial Mortgage

Commercial Mortgage
Posted on 
August 18, 2015

A significant part of being a commercial mortgage broker is driving in as much business as possible, so it can be difficult to turn potential borrowers away. However, your ability to review deals and decide whether or not they’re worth your time is crucial to your success. You’re not going to want to spend a lot of time working on deals you’re fairly certain won’t close when you could be working on deals that will.

Here are some instances when it’s best to turn down a non-bankable commercial property owner seeking small-balance commercial financing:

The deal is bankable.

If your focus in the commercial mortgage industry is securing financing for non-bankable borrowers who need small-balance loans, then a bankable borrower might be a waste of time. If a broker tries to charge their usual fee, it may not close simply because a bankable borrower isn’t going to want to pay their fee on top of the bank’s origination fee.

The borrower has recent mortgage lates.

There are small-balance commercial lenders who are willing to provide financing to borrowers with past mortgage issues. However, if your borrower has mortgage lates within the last year or two and no good explanation, it’s best to turn the deal away unless you have a hard money loan source.

The borrower cannot repay the loan.

The ability to make monthly payments is going to be a key factor when your commercial lender is making a financing decision. When you go over your borrower’s financials, make sure they will be able to make those payments. Otherwise, turn the deal down.

The borrower cannot provide a detailed use of funds.

If your borrower wants a mortgage from a non-conforming commercial lender, they’ll need to specify how they plan to use the money. If they can’t or won’t provide these details, turn the deal down. If your borrower doesn’t have a plan, lenders will be less likely to approve their deal.

Don’t promise what you can’t deliver.

You may know that your client is a high-rate borrower. If your client doesn’t understand why, explain the realities. If your client doesn’t except the realities, you need to move on.

While it might seem like your best bet to work on as many deals as possible, it’s important to know when to say no to a potential borrower. Wasting their time and yours will only lead to frustration when a deal is turned down by your commercial lender, so learn which deals are worth your effort.


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