Give Small-Balance Clients Big Choices
If new brokers follow three tips, funding smaller loans should be less of an adventure
By Joy Hunner, executive vice president, GEM Commercial Lending
As the commercial market
maintains some momentum, new
brokers continue to enter the field.
Often, these brokers start with clients who
seek small commercial projects instead of
large-scale developments.
Too often, however, new brokers may
not have developed relationships with
lenders and may therefore be unaware of
the lending options for funding loans of $5
million or less. As such, their clients may
feel limited in their loan choices.
This doesn’t have to be the case.
Although novice commercial brokers
may not have the years of experience and
relationships with lenders needed to find
Joy Hunner is executive vice president of GEM
Commercial Lending, a
division of Golden Equity
Mortgage Corp. With offices in San Diego and
Palm Springs, Calif., and
service capabilities nationwide, Golden Equity
Mortgage Corp. is a comprehensive mortgage-brokerage company. Visit www.goldenequi
tymortgage.com or call (866) 519-6290 to
learn more.
the best products for their clients upfront,
they can follow some tips to speed up the
learning curve.
1. Get to know lenders
Too often, new commercial brokers are
inundated with e-mail blasts and blanket
offers for generic deals that don’t really suit
most small-balance commercial loan requests. In truth, small-balance commercial
can have some favorable funding options if
brokers know where to look.
Small-balance commercial loans often have been saddled with higher interest rates and large prepayment penalties.
The key to getting your client the best
pricing and terms is to know how to package the loan effectively for a lender. Frequently, even clients with perfect credit, a
good loan-to-value ratio (LTV) and a high
debt-service-coverage ratio (DSCR) may
end up with a higher interest rate than
they deserve.
The trick for getting your clients a
good interest rate is to get to know your
lenders. Don’t just rely on their rate
sheets. Reach out to them to find out what
their hot buttons are.
For instance, what do they look for
most with clients? Liquidity? Net worth?
Global cash flow? Number of investment
properties owned? Types of outstand-ing debts?
In addition, determine how important
property type and condition are to each
particular lender. Look at its lending patterns. Does it prefer certain lending areas
or property types?
2. Reach out with e-mail
With lenders making regular changes to
their guidelines, e-mail is a great way to
communicate and get more acquainted
with them.
When you get a loan request, e-mail a
few lenders. Describe the loan request and
ask the lenders for their input or quotes for
the loan scenario. Most lenders are happy
to respond quickly with either a positive or
an uninterested reply.
Once you’ve done this a few times,
you’ll begin to learn which lenders still
have money to lend. You’ll also have a better idea of the types of loans they are interested in funding.
3. Know the details
Loan packaging can be essential to
ensuring an approval for your client. Pay
attention to detail with income-producing properties.
Make sure you know lenders’ guidelines regarding LTV and DSCR before
submitting a loan package. Anticipate any
questions lenders may have about income,
expenses, vacancies and other key issues in
advance, as well.
Have the answers ready before a lender
even asks them, and submit any explanation letters with your initial loan package.
This will make the lender’s job easier when
reviewing the file. Lenders will more likely
give a loan package priority if it has complete documentation on the property and
the borrower.
■ ■ ■
The key to not getting pigeonholed with
small-balance commercial loans is to know
your lenders and to know the keys that will
motivate them to offer your clients the best
loan possible.
Over time, an established relationship with lenders and knowledge of their
programs will yield the best products for
your clients.
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