What Can You Buy with a Commercial Mortgage
A commercial mortgage can be used to buy office buildings, warehouses, properties you intend to rent to other businesses or residential tenants, storefronts, shopping plazas, malls or any other kind of property that can be used to do business. Property you intend to live in yourself can’t be financed with a commercial mortgage loan.
How Much Can I Borrow for a Business Mortgage?
Real estate purchased for business use can be expensive. It’s not uncommon for commercial property to cost thousands or even millions of dollars, especially large buildings or big plots of land. Commercial mortgage brokers take this into account, so these loans usually offer very high limits to accommodate a standard business real estate purchase. Some banks, like Wells Fargo, offer commercial business mortgages up to $500,000,000, while others, like U.S. Bank, don’t have a maximum limit.
Small business mortgage loans have lower limits than those available to larger companies. Most banks only lend three to four times a business’s revenue or cash flow, although there may be exceptions.
Down Payments and Business Mortgages?
Business mortgages usually doesn’t cover the full value of a property, which makes a down payment a necessity. For commercial real estate purchases, the down payment required is generally around 20%, but it may be higher. Traditional lenders such as JP Morgan Chase or U.S. Bank often require a larger down payment, while credit unions may be more flexible.
Who Can Get a Commercial Mortgage?
Individuals as well as registered corporations and other business entities such as LLCs and partnerships, construction organizations and real estate developers who plan to rent out space to other companies may qualify for a commercial mortgage.
If you plan to purchase a rental property but aren’t an experienced property developer or an established business owner, you may have difficulty getting a commercial mortgage. In this situation, applying for a business home loan or mortgage is usually a better choice. Standard residential mortgages, like the kind you take out when you buy a house to live in, can also be used to finance multi-family properties with less than five units.
What Do You Need to Get a Mortgage Loan?
The first step in getting a mortgage is completing an application and providing documentation. What’s needed can vary between lenders, but most will want to see:
- Your driver’s license
- Bank statements for your business
- Personal bank statements
- Business financial statements, such as a balance sheet and income statements
- Credit scores and credit reports for each person on the mortgage application
- Business and personal tax returns
- Estimated net operating income, or the income you expect to generate with the property