Getting a commercial Mortgage is Tougher Today
We are, indeed, in the midst of a necessary and severe credit crunch. Accepted lenders, such as banks, Wall road investment houses and assurance fellowships have greatly curtailed their lending activity. Even the very best investors and developers are finding it hard to get projects funded.
The collateralized debt shop has dried up. Few bond buyers are interested in mortgaged backed paper today. Big institutional lenders are finding it impossible to turn the mortgages they create into cash. Put in straightforward terms; no mortgage buyers, no mortgage loans.
Property owners, investors and developers are left frustrated and without financing.
Good Deals on the Sidelines
The dollar volume of pent-up commercial mortgage loan examine now measures in the hundreds of billions of dollars. Deals that, just a year ago, would have enjoyed quick funding are being rejected by banks out-of-hand. Not because they don't have merit, but because the banks and their counterparts are caught up in the liquidity crises.
With millions in profit inherent at stake, commercial asset investors are seeking out non-traditional sources of mortgage funds.
Private commercial Mortgage Loans; Funding Deals When Banks Won't
Privately funded commercial mortgage loans are becoming increasingly favorite while this mortgage meltdown. Hidden lenders, many funded by wealthy individuals, hedge funds or other large pools of capital, often lend their own money for their own portfolios. These unique lenders have not been crippled by the breakdown of the collateralized mortgage bond market. They can still create loans at will without worrying about who may or may-not want to buy them.
Further, Hidden loans (sometimes called "hard money" loans) can close in just days, as-opposed to Accepted loans which, if you get one at all, can take 3 months or more to fund.
There are ordinarily no loan committees, stacks of paperwork or complicated ratios to deal with. If they like your deal and you demonstrate that you can pay them back, they can and will close your loan no-matter-what Wall road is doing.
What Hidden commercial Mortgage Lenders Look for
Private lenders are equity based lenders; loan decisions are not driven by the credit of the borrower. It is necessary that the collateral asset have titanic equity in it. Most hard money commercial lenders won't lend more than 70% of the purchase price or, in the case of a refinance, the value of the commercial property. So be ready for large down-payment requests or a good sized 2nd mortgage. Also, borrowers will need to have some cash, typically 10% or more, in any given deal. There is no-such-thing-as 100% financing today. Documentation requirements will be much less than Accepted lenders would want but be ready to back up any claims you make with some proof.
Income producing buildings are favored by hard money lenders but most are willing to consider all asset types.
Hard Money commercial Loans Have come to be Indispensable
With the large Accepted lending institutions freezing like a deer in the headlights, private, hard money commercial lenders have come to be necessary to the commercial sector. They stand ready and willing to lend against capability buildings or well thought-out amelioration projects. Investors should not give up on finding financing for their best deals until they have looked into a confidentially funded mortgage.
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