A commercial mortgage is a lot different than a residential mortgage. The mortgage process for those that are looking for commercial properties can often be a daunting experience that scares away most that apply. When it comes down to qualifying and putting down a larger down payment, many find that the application process isn\’t even worth their time. Granted, while most lenders are different, there are many pitfalls to a commercial mortgage that many don\’t even know about.

The Verification Documents

Commercial mortgages often won\’t be approved until the applicant provides more than ten verification documents! These documents can include pay stubs, tax returns, bank statements, retirement accounts, history of the primary residence and a lot more. Many lenders want to make sure that they are only lending to the best of the best. Unlike a residential mortgage, commercial mortgages will require a lot more in terms of documents.

Down Payments

Most commercial mortgage brokers will often ask for more than a 20 percent down payment. In fact, this down payment can often be higher depending upon the value and location of the property. This is the one thing that scares away many potential applicants because most don\’t have the significant down payment to secure the property.

Credit History

Commercial mortgage brokers often run a vigorous test on an applicant\’s credit history. While the credit history doesn\’t have to be in pristine condition, the score is going to have to be within a good range. Like the down payment, most applicants can have a hard time securing a loan based on their credit history. Even if the credit history is mediocre, lenders can often charge a hefty interest rate.

Approval Process

A residential mortgage can often take no more than 30 days to approve. This generally isn\’t the case with commercial mortgages. Due to the lengthy process, it can take more than 90 days to get an approval letter. If you thought 90 days was a long time, there are banks out there that can even take longer. Those that are looking for a quick process may soon find that this isn\’t going to be the case.

Penalties

Many penalties can apply such as pre-payment penalties and more. While each bank is going to vary with their own policy, be sure to know what exactly is going to be charged in terms of fees. Late fees and additional fees can pile up rather fast if you don\’t look at the fine print closely.

Higher Interest Rates

Most banks don\’t want to lend on a 30-year basis. Most are going to lend anywhere from five to as long as 15 years. Due to the length of the loan, some loans can often have higher payments as well as interest rates. Again, remember that each and every bank will set up their own mortgages in their own way. While some may seems unaffordable, there are some that can be outside of your budget.

Collateral

Due to the many failures that commercial property owners often come across, many banks will want some sort of collateral to back up the loan. This can include cars, homes or even personal items with some sort of value. Like the down payment option mentioned above, many applicants can\’t come up with the collateral needed in order to back up the loan.

While these are the many pitfalls to a commercial loan, there are pros that come along with it as well. Each and every bank will greatly differ. This is why it\’s extremely important to meet with a commercial mortgage lender in order to find a mortgage that best suits your situation.

Andrew Black is the resident writer for commercial Mortgage broker sites including Charleston Financial – visit the site for your commercial mortgage advice and needs – http://www.charlestonfinancial.co.uk

Andrew Black is the resident writer for Mortgage broker sites including Charleston Financial – visit the site for your commercial mortgage advice and needs – http://www.charlestonfinancial.co.uk

Author Bio: Andrew Black is the resident writer for commercial Mortgage broker sites including Charleston Financial – visit the site for your commercial mortgage advice and needs – http://www.charlestonfinancial.co.uk

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