Making the Right Choices in Lending

    by Aditi Bansal

Updated on Tuesday, June 27, 2017

It is important to do a thorough research before selecting a lender that’s right for you, whether you are a real estate investor who has identified a prime property or a commercial mortgage broker who represents a middle market real estate.

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Since the recession, there has been a downward trend in the commercial real estate debts, especially on transitional loans which are valued at less than $35million.

Do your research

Sometimes finding the right lender to undertake your projects will hugely depend on the type of property and the location. Also, lending is divided within the middle market space and encompasses commercial assets that are valued below $50million.Most of the lenders operating within this space would hardly deviate from the needs of their capital partners.

Sources of capital

Understanding the lender's decision making process and underwriting is important when going through the loan submission to loan closing. It’s also important to do your research on the attributes of a lender and what qualities are best suited for the right individual. That said, lenders should provide all the vital information since some might be the correspondent of third party capital sources such as banks.

Also, correspondents outside capital do not have control of the outcome and process, but it’s worth checking out the relationship between the third party and the lender. Take note that alternative lenders do not work with lenders. However, understanding their operation is vital before settling on any financial deal.

Multiple interests

There are different alternative financial engineering techniques used by capital partners to boost returns. Unlike bank loan that stays on a balance sheet, alternative lenders sell part of the loan, and this, not only expands the capacity of lenders but also enhances returns to make additional loans. Also, it’s used in spreading loans among investors and participants. Borrowers wouldn’t feel a pinch in such instances, but it might make it difficult to get a settlement on anything relating to their loan or it can get messy if they default.

Additionally, brokers working as clients and operating in the middle-market space must realize that this is a complicated environment for them to navigate. It’s important for you to determine the attributes best suited for a loan or lender then conduct your research on behalf of the borrower. Any brokers that don’t stick to the rules can make everything complicated for the client.

This page has a focus on Right Choice in Lending, Mortgage Broker was shared by Aditi Bansal.

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