COMMERCIAL LOANS

Commercial properties are everywhere, in our neighborhoods,in our cities, and on every corner. There are probably just as many commercial buildings in the United States as there are single-family homes, and most likely just as many commercial real estate loans, too. Like residential properties, commercial buildings are built or purchased with borrowed money. Money borrowed for the construction, purchase, or refinance of a commercial property is commonly referred to as a commercial real estate loan or commercial mortgage. Commercial mortgages have nothing in common with single-family residential mortgages. They are like night and day. Even the professionals who engage in the origination and underwriting of commercial mortgages are distinct in every way from those who work in the residential mortgage industry.

Whether you are a novice real estate investor looking for your very first commercial real estate loan or a residential mortgage broker looking to venture into the commercial mortgage brokerage business, you will need to forget everything you know about residential mortgages. Terminology like “stated-income,” “full-doc,” “HELOC,” “good-faith estimate,” and “discount points,” which are unique to residential mortgages, cannot be found in the lexicon of commercial mortgages. The commercial real estate loan industry is very complex and takes years to master. But mastering the industry doesn’t have to take years, especially for those who wish to get a head start. Learning how and where to find a commercial real estate loan is what this whole book is about. Chapter 1 is an overview of commercial mortgages and the commercial real estate loan industry and begins by defining the terms “commercial” and “mortgage” in the context of commercial mortgages. Within this chapter you will find a discussion of the different type of commercial properties and commercial real estate lenders, including an explanation of typical financing terms found in every commercial mortgage. At the conclusion of this chapter you will be introduced to the methods and terminology used in underwriting a commercial real estate loan.