Introducing The Commercial Mortgage

A commercial mortgage is similar to a personal residential loan in that it is a mortgage secured by real property. From there, however, things differ greatly. The two loans might as well be estranged for all the differences between them. no telecheck installment loans direct lenders - Its web page offers a listing of licensed home loan bankers and brokers.

The process of obtaining a commercial loan is similar to a residential loan when looking at the bare skeleton of the process. You find a property, file a mortgage application and then negotiate till you get acceptable financing. The devil with commercial mortgages is in the details and it can be a real devil.

Most commercial mortgages are taken out by businesses, not individuals. As a result, determining the credit worthiness of a particular borrower can be a tricky process. Much due diligence is undertaken by the prospective lenders. Capital in the form of other real estate or secured assets can be required. Alternatively, borrowers can look for brokers that work with Fannie Mae, USDA, SBA and FHA to obtain government backing. These entities usually do not write loans directly, but they will guarantee part or all of them. That makes you a much better risk for a lender, which means your chance of getting financed are much better as well.

A key area to consider with a commercial mortgage is the recourse factor. There is both recourse and non-recourse financing available. Non-recourse financing restricts the lender from going after anything other than the property should a default occur. On the other hand, recourse financing offers no such restriction. You can easily guess which is best for your situation.

Commercial loans are commonly done as what are known as balloon and amortization mortgages. What does this mean? Few parties actually will hold a commercial loan for its full length, ie, 30 years. As a result, they loan is set up with a term that is much shorter. For instance, a 8 year term would require the borrower to make payments for 8 years and then make a balloon payment for the remaining balance. The monthly payment amounts, however, are determined by using a 30 year payment period, to wit, they are lower than one would get with an 8 year period.

Obtaining commercial loans often requires a deft touch. Make sure you take the time to investigate all the options available so that you not only obtain financing, but get a good deal as well.

Thomas Ajava writes for CommercialFinanceMortgage.com - your online resource for commercial finance mortgage information and financing.