Commercial Loan Rates in the Credit Crisis

The question isn’t “what’s your current commercial mortgage rates” but rather “can you actually get this done”. All too often we get new potential customers that come to us seeking commercial mortgages and within the first moments they ask what are commercial rates are. We don’t blame them, they’re just trying to protect their time, and secure the best deal for them, but many borrowers have not faced up to the realities of the current credit crisis.Obviously it’s no secret what is going on, on Wall Street. The government has provided the biggest bail out since the great depression. One of the surprises for many borrowers is that even though many index’s, like the treasuries have had substantial drops, the actual interest rates on commercial mortgages have in most cases gone up (for those banks that are still lending money). Basically the banks have further raised their margins to make the loans more profitable and or to better cover future risks. In some cases banks have had their own credit rating dropped and as a consequence their cost of capital has shot up. So when they quote rates, or fund commercial mortgages, the rates they offer are seriously affected.But again this is beside’s the point. Borrowers should really be investigating if the bank, lender or broker can really close the prospective loan. Questions like “When was the last restaurant (or what ever building type your looking at) you closed? How tough are your new standards? What is your current turn down rate? How clean does the loan request really have to be to get it funded?” You need the representative to level with you. You really have to go deep. Having your loan tied up with a bank for months, that has a low chance of closing from the beginning, is a huge waste of time for all involved.The best way to get a loan qualified is to be totally upfront with the source on whatever the issues are. And there are always issues. Tell the bank and or broker all the good and bad news up front. After they have enough information, they should be able to give you some meaningful answers, including quotes. Obliviously this will take some patience, but not as much that would be needed if you pick the wrong bank that looks at it for a few months than declines the file. And believe me it happens all the time now.

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