A Basic Guide To The Underwriting And Closing Phases of the Commercial Lending Process

It takes timeOne thing to understand right at the beginning is that the underwriting and closing phase of the commercial lending process won’t happen overnight. There are a large number of documents that need to be gathered and provided by many different parties and each of these documents must be reviewed for accuracy.During the underwriting stage, a number of different documents need to be compiled so they can be presented to the credit committee so that a credit decision can be made. Once the credit decision comes down, it’s on to find a lender. These documents include the original loan application, third party reports, the appraisal, inspection reports, operating statements, the title report, property condition reports, and any other required documentation such as an environmental report.The mortgage broker will submit your application to five or six different lenders that are felt to be a good match for your application. The details are discussed with each of the different lenders to see which one can offer the best terms. It can take 30 to 45 days once a lender has been chosen for the underwriting process to take place and 45 to 60 days from the beginning of an offer to closing. Remember that if a lawyer is required to tie up any loose ends that will add time as well.Surprises can be fun but not when you’re trying to get a commercial loanOne thing to keep in mind is that the more you know about the property you are about to purchase, the better you will be at making sure there are no unwanted surprises that may derail the deal. Your mortgage broker is invaluable at making sure you have all the necessary information required by your lender.Your broker will help guide you through the process and make sure that everything is moving forward. This is done by asking all the right questions of the escrow officer to ensure that all parties are responding with their assigned tasks, such as the appraiser getting his report in on time. A closing checklist that can be obtained from your lender will help you avoid potential pitfalls as well.Let the closing begin!Once you’ve paid your commitment fee and the loan has been approved by your lender, you’re off to the races. The loan then goes into what’s known as closing. It’s at this point in the loan process that the final documents such as the loan and closing documents are assembled. The paperwork is then prepared for signatures and execution so the loan can be closed and recorded.Have an extra pen handy as there are far more documents to sign than in your average residential loan. This depends on the type of commercial property you’ve purchased but this will include the mortgage document or deed to trust, a promissory note, an assignment of rents document, and the subordination non-disturbing agreement document among others.Stay focusedEven though this is a long process with a lot of information to gather, it can be a rewarding venture. Keep focused on your long term goals, stay informed about the area markets, and make sure you are knowledgeable about the property you are going to purchase. All these things will help you make informed decisions and reduce the risks involved.