When should you use a commercial loan broker? When you’re frustrated with dealing with the incompetency and lack of follow through with your local banks, for starters. Time is money, it’s an old and over used saying, but it is true.
How much does it cost a borrower in terms of money and time if they take their loan request to a bank and after 4 months the loan doesn’t close and they end up declining the file? Many borrowers are facing ballooning loans and will incur a technical default should they not refinance the debt in time. Having a default, even a technical one, is extremely damaging to financing the property in the future.
Borrowers want to avoid paying a commercial loan broker 1%, however they are used to paying commercial real estate brokers 5%… Many would argue that mortgage originators do much more work and have to have much more technical knowledge to get a commercial real estate loan closed.
Even if in less dramatic situation where the borrower is just considering saving time by working with a commercial loan broker, rather than going out and shopping banks and processing the loan on their own, it still makes a ton of sense to use a qualified commercial loan broker.
We see many borrowers make costly mistakes when they go out on their own. Hiring an appraisal company directly is a simple and all too often mistake we run into. Borrowers, after spending $3,000 on an appraisal are shock to learn that the bank/lender will not use it, as it is against the federal banking rules. Also, we see many borrowers that buy properties on a land contract, do so with getting any type of environmental studies done. They could be buying Chernobyl and not have a clue, because they want to save $2,000 on a property they dump $500,000 into.
Another component of this and a huge mistake borrowers make is that they send a loan request to a bank without knowing how healthy the bank truly is and what their specific appetite is for the type of loan submitted. This is difficult information to gather as the bank loan officer isn’t going to tell a borrower, “hey I think we have a 25% chance of getting this done.” The bank’s loan officer is most likely going to throw it against the wall and see if it sticks. Your chance of closing your loan will dramatically increase by hiring a commercial loan broker.
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A lot of people dream about building a new home. Everyone wants a home that will work with their lifestyle and reflect their character and be original and attractive to the eye. Getting a construction home loan can be a scary task. Residential construction loans are different from traditional home mortgages in many ways. A construction loan is the loan that is given to people to meet their cash crisis during the construction of a house. Many a time, people face shortage of cash while the construction is in full swing. In such cases, they need cash within a short notice. A construction loan is the perfect option to handle this situation. These loans are also known as story loans, as lenders offer the loans after being aware of the story behind the construction.
There are several types of residential construction loans to choose from. If you choose the owner builder loan, this means you are acting as the general contractor and you are solely responsible for the construction getting completed on time and within budget. A custom contractor loan has the contractor being responsible for making sure that the construction gets done. A remodel or addition loan is for when you love your home and your neighborhood and don’t want to move but need more space. This loan takes into account how much the house will be worth after the addition or remodel. There is also a tract or subdivision loan, which is the kind of loan you will need if you decide to build a house in a subdivision, choosing from the builder’s standard house plans and adding any upgrades you want.
When you think about building a home, you have to figure out how much it is going to cost you. You take the cost of the building site, your home design, the construction costs and the costs of financing, which will give you the total cost of building a new home. It is always a good idea to pre-qualify for a construction loan. The process to pre-qualify takes into consideration your credit record, any down payment you can make, the type of loan you want, and the current market value of homes. If you pre-qualify, you will know up front the amount of home you can afford to finance and build.
Not all residential construction loans are alike. Many are based on a six-month or one year plan, which means they will be completed within that time frame. Some allow you to lock in your interest rate at the lowest rate, and others are variable interest rate loans, which means the interest rate changes with the market. Other loans are bridge loans, which allow you to use equity from your current home until your new one is finished. Many require interest only payments until the house is completed; at which point those payments are due. The best choice is to get a construction loan that can be converted into a mortgage loan so that you only have to fill out one application and have the costs associated with one closing instead of two.
Building a new home does not have to be scary if you do your homework, plan well, and realize that not everything will go according to the plan. When choosing the best home construction loan, it is best to compare the rates of the different financial institutions offering this loan. Usually, the lower the rate, the better deal is, but it is important to read the fine print and know the details of the different offers.