Peter Pays Paul

Commercial mortgage brokers would do well to take 15 minutes to get acquainted with the lenders on their lender list. While a rate sheet and lending matrix can be helpful, nothing beats a phone or face-to-face interview.

Here are nine questions that will allow a commercial broker to focus their efforts and to target properties to the right lenders.

1. What are your minimum and maximum loan amounts? - Calling a lender with a deal that is either too big or too small is a waste of your time and theirs.
2. Do you have a geographical limitation? – Some lenders can only lend in certain metropolitan areas. A loan outside of these areas is an automatic “No”.
3. What property types do you prefer? – You don’t want to take a loan on an auto body shop to a company that only finances apartments.
4. How long does your average loan take to close? What is the shortest amount of time you have personally seen a deal close? – This is very important to ask if you are dealing with 1031 exchange properties. It can help you weed out lenders for deals that need to close quickly.
5. What is your maximum loan-to-value ratio? – This helps you to eliminate lenders that cannot provide the leverage your borrower needs.
6. What is your minimum debt-service coverage ratio? – Along with the question above this helps you to determine the amount your client can borrow based on the properties income.
7. What information do you require from the borrower in a loan package? – It is frustrating for a lender to receive a trickle of information about a loan over a period of days, weeks, or months. Knowing beforehand what a lender needs, you can  assembled all the necessary documents before you send it to the lender for review and hopefully a quick answer or LOI.
8. What is the best way to contact you if I have a deal? – Contacting the lender through their preferred method shows a deference to working on the lender’s terms. It shows that you want to make things easy for them, not yourself.
9. What loans are you the most competitive on? – Sometimes lenders will tell you that they will lend on a certain type of property, and they probably will. However, the rate, LTV, or DSCR will make it practically impossible to get a loan from them. This question helps to narrow the scope to only the properties they can offer competitive financing for.

These are my nine suggested questions to ask your commercial lender. Do you have any others that you would recommend?

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