February 18, 2016
Some investors shop aggressively looking for the best commercial loan they can find, talking to many loan companies. Other investors may talk to just one loan company and decide on that one. Importantly though, many investors miss the boat when they are shopping for a very good lender. Here are three mistakes investors make in the process of selecting the lender they want to work with.
1. The investor only focuses on getting the lowest rate.
This could be a big mistake. Just because you have the lowest rate, it doesn’t mean you have the best loan or best lender. There are so many other factors than rate for selecting a property. For example, what if the lender gives the investor a great rate, but the loan expenses are very high, making it a bad deal. Or, what if the lender chooses a substandard loan company in which the payments are too high for the investor - the investor ends up defaulting on the loan, thus losing the property.
2. The investor pits one lender against another to get the best rate and terms.
This is similar to number 1. An investor tries to get lender A to lower their rate by saying lender B gave me such and such rate. And then if lender A lowers their rate, the investor could go back to lender B and say that investor A gave me an even lower rate.
Again, the problem with this approach is that the investor could get so caught up in getting a lower rate, that they ignore other important factors such as experience, reliability, and honesty of the lender. An example - the lender is not experienced and makes a costly mistake such as selecting a loan program the investor doesn’t qualify for. The problem is that it takes two months for the lender to discover that the loan program was a bad choice. The consequence – two months of wasted time and the investor loses the opportunity to purchase the property.
3. The investor shops aggressively and doesn’t choose based on quality of the lender.
This can cause a multitude of problems with costly consequences. An example is an investor who gets so caught up in rates and terms that he doesn’t do due diligence on the lender. The lender turns out to be unscrupulous. The lender gives a very low rate that is a false rate. 6 weeks later the lender tells the investor that rates have gone up. The lender lied. Rates have not gone up; they have gone down. But, the investor doesn’t know how to calculate loan rates for commercial properties, and believes the lender. It turns out that the investor didn’t get a competitive rate, but walks away thinking they got a good deal.
When searching for a commercial property, make sure you are educated on all the important factors that are important in selecting a good lender and a good loan. Do you due diligence to find a top notch lender. Get a referral from a commercial lender with a lot of experience and a lot of success. Get mentoring on the business of commercial investment – all facets including commercial lending.
Select a lender who will educate you on the loan process and answer your questions. – such a lender will help you make wise decisions. Apartment Loan Store is one such company. With our A+ Better Business Bureau rating and excellent customer service, we work to give you a very positive loan experience.
Contact us to see if you pre-qualify for our best multifamily, commercial, bridge, construction, or business loan rates and terms. Also, contact us if you would like to discuss your particular commercial lending needs, or if you have any questions. Call 214-695-7310, or send an email to firstname.lastname@example.org
Bruce Painter, Director of Marketing, Business Loan Store