Key Tips for Mortgage Brokers
Hard money commercial lending is very different than conventional commercial lending. Hard money lenders focus on the real estate asset as opposed to the borrower’s credit, personal income, tax returns, etc… The hard money commercial lending arena is lightly regulated and therefore the broker must be very careful in order to protect their client and themselves. Below are key tips for mortgage brokers to keep in mind prior to brokering a hard money / private money commercial loan.
Key tips for brokers
- Fully understand the deal and what the client is trying to accomplish
- How quickly does the deal need to be closed
- Are there are issues with credit, bankruptcies, cash flow of the property, title, etc
- Is there a story behind the transaction
- Learn which lenders offer products that fit the deal you are trying to place
- Watch out for brokers masquerading as lenders, many times brokers claim that they are lenders when in fact, they take your deal and shop it to lenders and sometimes other brokers. Fairview Lending is a privately owned directly lender that strictly lends its own funds and never brokers any deals.
- Before submitting a loan ensure that both you and the client understand how the loan process will work (inspections, closing, etc..)
- Be wary of up-front fees. Many lenders in the industry charge very large upfront “due-diligence” fees prior to issuing a commitment (10-100K depending on the deal). Make sure that the client fully understands these fees and that they are typically non-refundable. Fairview Lending never charges fees prior to commitment
- Ask for a formal commitment from the lender that outlines all points, prepayment penalties, rates, and other fees. Fairview Lending provides a preliminary commitment typically within 24 hours of deal submissions
- Be wary of lenders that try to pull a bait and switch at or near closing. Many lenders will offer a deal too good to be true only to change the deal at closing. Fairview Lending always provides a final commitment prior to closing which outlines the final terms of the transaction
Brokering a no-doc / hard money commercial loan is very little incremental work on loans that have fallen out of the matrix programs. The broker should already have the key information required by most hard money lenders lenders. By understanding and utilizing a hard money commercial loan a broker can assist more customers while also increasing their bottom line with a high margin loan. The tips above will help avoid many of the pitfalls associated with brokering a hard money commercial loan