Hi

I an residential loan broker and interested in expanding my business to commercial. I was wondering

1. what is the major step differences between residential and commercial?

2. To apply for a commercial lender, do we need to sign application package from lender to get approval first or we can take lender's wholesale rate, quote to clients and then take the deal to the lender?

3. What is the commonly used origination software for commercial?



Thanks for help

There a remany differences between commercial and residential underwriting. The differences depend on the type of commercial property. Investment is underwritten differently that owner occupied, apartment is different than office etc etc.

Some basic differences

Look only to the subject property to service the debt. (borrower credit still a factor) Property must stand on its own financial feet.
Use DSCR (debt service coverage ratio) rather than DTI for qualification (1.20 or better)
There is no 100% financing
Income approach is stressed rather than comparable value for appraisals
Each property type has its own underwriting standards.
Each property is underwritten on its own merits as opposed to those of a residential borrower.
The quality of presentation for a commercial deal is far more important than in residential.

Most commercial lenders do not require a broker package and approval. Most commercial lenders do not have a loan matrix as residential lenders do. Commercial rates and terms will differ from loan to loan. Each deal is priced on its merits.

Although I do not use any commercial origination software there are a few such as brokerpro. I don't use them because there are so many types of deals and scenarios that no software can adequately do what I need. Originating and packaging commercial loans is much more than taking an application. Each deal has to be analyzed and structured well before being underwritten.

Thanks for the answers.

So if there is need to sign up a package with a lender, then how the relationship get setup and who will be the broker main contact for a lender? is there any commercial AE for each lender?

I was told some lenders don't want to deal with broker, why is that?

Thanks a lot

I can't answer your question regarding who your contact will be be or how the relationship will be set up. Only the lender can tell you that.

Commercial deals are much more complex than residential. Some commercial lenders shy away from brokers simply because most brokers don't know how to properly put together a commercial deal. It takes a great deal of time and resources to deal with brokers when the number of loans actually closed is small relative to the number of submissions. I know from my own experience I have received as much as $1 billion in loan requests from brokers in the past three years. Of those, perhaps $30 million were closed. Some lenders just don't to spend the time catering to the broker community.