Below are answers to some of our most frequently asked questions. Every commercial loan request is evaluated on a case-by-case basis, but hopefully this will provide a general guideline for your review.
Why is it better to use a mortgage broker vs. a direct lender like a bank?
Direct lenders only have one program and you need to fit their box, they are in control. Not only do you have no comparison to know if their offer is competitive, but commercial lending is very specialized and many times there is a better fitting lender for your goals. Many direct lender employees also work on salary, with no incentive to fight for your loan or expedite their process. Working with a mortgage broker you gain access to a multitude of lenders, a broker managed bid process to ensure best rates and terms, with our experience and lender relationships to set you up for success from the start, solve any problems that may arise in process, and get your loan closed successfully and quickly. Our team will be available to you and working on your loan 24/7 until closing - for no additional net cost to you.
Am I obligated to work with you in order to see my loan options?
No, you are not obligated to work with us. Any conversations and due diligence performed by HarborWest to help arrange potential commercial loan options are a free consulting service provided by our company. We are confident in our abilities and track record, and especially in a purchase or 1031 situation would understand and welcome any competition. Our goal is to earn your business by providing the best offer and best experience. Upon selecting a program, you will need to sign a non-circumvention agreement, however should you decide to cancel or take a different offer while in process you will not owe any commissions or fees to HarborWest.
What are your broker fees, and typical fees of a commercial loan?
The standard origination fee in the commercial mortgage market is 1.00% of the loan amount. This cost is paid by the borrower through escrow at funding and closing of the loan. If you did not use a mortgage broker, the direct lender you work with would likely charge you the 1.00% standard origination fee. When a mortgage broker originates the loan for the lender, common practice is that the lender will pass that 1.00% fee to the mortgage broker. This means that our services and benefits are a net zero cost to you. Other fees can vary drastically depending on the type of request and lender, but can include: property reports, processing, loan documents, legal review and title/escrow charges if not being paid by the seller. Please discuss with us for a better estimate of total fees based on your scenario.
What will I be required to submit for loan options, and for loan approval?
How many lenders is my request sent to? I'm concerned about my privacy.
What is the general process from the commercial loan application to funding?
The first step is a consultation with us - we can provide some general feedback and soft quotes same day. For vetted loan offers, we will need to collect some documentation and information to do so, and 2-3 days to work. Upon selecting a loan option, you generally will sign the offer and submit a good faith deposit. The lender will use that deposit to order property reports. While reports are processing, the underwriter will have various needs to complete their work and any conditions to funding. After property reports are in, a final review and approval is given. The remainder of the process is handled by the escrow company to coordinate funding and their closing process.
How are commercial loans structured?
How is the maximum loan amount determined?
What are commercial mortgage rates right now?
What types of lenders are active in the commercial mortgage market?
Do you lend on residential properties (1 to 4 unit residential properties)?
Does HarborWest offer referral bonuses for new clients and deals?
For quotes, the more information provided the more accurate and competitive those quotes will be. However we understand any privacy concerns, so what isn't provided is assumed qualified. At minimum, we will need property information (rent roll, P&L, etc.) or business financials for owner-user requests, to arrange soft quotes. Once in process, the funding lender would need various forms, historical cash flow, lease copies, proof of assets or liquidity and likely tax returns. Some lenders are more demanding than others, but we try to make the process as easy as possible for clients. Every lender and request is unique, please contact us to discuss.
HarborWest has access and experience with over 275 different lenders. Your loan request and personal information however isn't simply blasted to all lenders. We respect your privacy and are much more strategic in our approach. After a complete review, our team will zone in on a dozen or less lenders that from our experience and market knowledge we know would qualify and be aggressive on our request. Your information is always encrypted when possible, and shared with select lenders usually through secured email servers.
Most commercial loans are hybrids - they are fixed for a certain period (say 3, 5 or 10 years) and then adjust every year to market rates until the loan is due up to 30 years. Most multifamily loans are 30 years amortized and commercial 25 years. These loans typically also have a prepayment penalty if paid off early. Bridge / rehab loans are typically shorter term (say 12-36 months) with interest-only payments and minimal prepayment penalty to help get you to the next phase of financing.
The maximum loan amount is typically determined based on the cash flow of the property. The current in-place rents and reported expenses, along with lender underwriting ratios that create a cash flow buffer determine a potential maximum. That maximum can be reduced based on minimum equity as determined by the program baseline, or if there is any perceived risk where additional equity would make the lender feel more comfortable. Owner-user properties do not have lease income, so the P&L of the business itself is used for qualification. Bridge and rehab lending does not rely on ratios as much, and loan amount can be determined based on pro-forma projections or other borrower strengths that gets the lender comfortable with the security of their repayment.
Commercial rates are much harder to blind quote like residential rates can be. They are investment loans and much more specialized than standardized. So a full review is really necessary to get accurate quotes for any given deal. In general however, commercial rates are usually 0.25% - 0.50% more than residential rates for long-term programs. Bridge and rehab loans can be higher depending on the request. We can give you a ballpark figure with some basic details during a consultation call.
There are a variety of lenders active in the commercial real estate mortgage market. Bank, credit unions and agency lenders (Fannie/Freddie/FHA) are active players. However, so are life insurance companies, Wall Street conduits, private companies and individuals, web-based crowdfunding groups and other types. Each lender type does better with certain situations and specialize in different areas. We will recommend and explain the type of lender best for your specific scenario as we move forward.
For the most part, no. Commercial is considered properties with 5 or more units. Properties with 1-4 units is considered residential and handled by a different specialist. We have a strong network and can recommend someone in your area to help if you would like to get in touch with us. However, if you have a portfolio of residential properties, we can offer a commercial blanket loan on all of them cross-collateralized together which we are happy to review the pros and cons with during a phone consultation.
Yes. If you are a real estate professional that has a client in need of commercial financing please contact us regarding our referral program. We generally are able to provide a 25% referral bonus to qualified individuals that meet licensing and company requirements. We have a number of great referral sources that trust their clients with us. We hope you give us the opportunity to do the same for you!