Commercial Real Estate

The Top 10 Questions You Need to Ask Your Commercial Mortgage Broker

Expertise: Business Management, Commercial Real Estate, Landlording & Rental Properties, Real Estate Deal Analysis & Advice, Mortgages & Creative Financing, Personal Development, Real Estate Investing Basics
126 Articles Written

Before you put an apartment building deal under contract, you should clearly understand your potential lenders' loan terms and underwriting criteria.

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Imagine this: You put a deal under contract and you assume a down payment of 20%, and you later find that you’ll need to put 30% down. Or that you don’t personally qualify for the loan and you’ll need to find a co-sponsor. Or that the lender requires a 6-month reserve that you didn’t count on.

While sometimes ignorance is bliss, in this case these kinds of surprises could cost you a deal. And when you’re doing a deal, you don’t want surprises like these.

The lesson learned is this: clearly understand the terms of the potential loan and how the lender will “underwrite” the deal.

To “underwrite” is a fancy term that refers to how the lender assesses the risk of project, what they require of you as the sponsor to mitigate those risks, how it satisfies their lending guidelines, and the ultimate terms of the loan.

Related: Real Estate Financing: How to Choose Between Bankers, Mortgage Bankers & Brokers

In order to understand your lender’s underwriting criteria, make sure you network with potential mortgage brokers or lenders long BEFORE you start making offers on deals.

10 Questions You Need to Ask Your Commercial Mortgage Broker

In your interview with your commercial mortgage broker, ask them these 10 questions:

  1. What are the basic terms I can expect for a typical loan? Specifically, what loan-to-value (LTV), interest rate, term, and amortization can I expect?
  2. Is the loan non-recourse, or does it have to be personally guaranteed?
  3. What are the costs of the loan? Specifically, what are the origination fees (typically 1% of the loan), and what is the cost of 3rd party reports, such as the appraisal, structural and environmental reports, and legal fees?
  4. What size loans do you typically do, and in what areas?
  5. What are the prepayment penalties if you decide to refinance or sell before the term of the loan?
  6. What are your liquidity and net worth requirements? Typically the lender will require the sponsor(s) to show liquidity of 10% of the loan and a net worth equal to the loan balance.
  7. Do you require any reserves or minimum account balances? Some lenders want you to deposit 6-9 months of interest payments into an escrow account and/or keep a minimum balance in the bank account. Some also want you to bank with them as a condition of the loan.
  8. What is the typical time to close from the time I order the appraisal? Normally loans take 45-60 days from the time the appraisal is order to close. Make sure you know the timeframe for this lender.
  9. How do you define a “stable” asset? Typically assets that are at least 80% occupied are considered “stable” and anything less occupied is considered “distressed.” If you’re talking to this lender about a conventional loan for a “stable” asset, make sure you know what they consider “stable.”
  10. What kind of loan products do you provide? Lenders could provide one or more of these loans: conventional, Fannie Mae/Freddie Mac loans, FHA/HUD loans, bridge loans, and/or construction loans. The more products a broker can provide, the better.

Related: What Mortgage Lenders Look For When You Apply For a Loan

Keep copious notes, and then add the answers to each of these questions to a spreadsheet where you track the nuances and terms for each lender. Do this for 3-5 lenders and you’ll get a good idea of what’s “normal” and what might be a bit unusual.


Now that you have the answers to all of these questions, you will better understand your lender’s requirements to ensure you qualify for the loan and you know the actual terms. Then, once you have a deal under contract and time is of the essence, you already have a relationship with the broker, you already know what terms to expect, and are confident that you have a very good chance of being approved for the loan. Following these steps systematically will dramatically increase the chances of closing the deal.

Are there any questions you ask your commercial mortgage broker not listed above?

Let us know with a comment!

Michael Blank is a leading authority on apartment building investing in the United States. He’s passionate about helping others become financially free in 3-5 years by investing in apartment building deals with a special focus on raising money. Through his investment company, he controls over $30MM in performing multifamily assets all over the United States and has raised over $8MM. In addition to his own investing activities, he’s helped students purchase over 2,000 units valued at over $87MM. He’s the author of the best-selling book Financial Freedom With Real Estate Investing and the host of the popular Apartment Building Investing podcast Apartment Building Investing podcast.
    Replied over 5 years ago
    Very good to-the-point article Michael. Do you have any preference as to which Brokers do you use (local vs. national) and some of their names?
    Replied over 5 years ago
    Very useful list. Thanks! My commercial loan also requires a yearly personal financial statement. Do you know if this is a federal requirement, or just my local banker’s rule? Another good question is whether a cash down payment is required or if pledging assets can be substituted for the down payment. Also, can the down payment be waived if the property appraises for enough higher than the purchase price?
    Michael Blank Rental Property Investor from Northern Virginia, VA
    Replied about 4 years ago
    Thanks so much for your question. Could you please re-post it to “Ask Mike” at so that others can benefit from the conversation?
    Justin Elkins from San Angelo, Texas
    Replied over 5 years ago
    In my experience, they will still want the down payment based on the lower of the two, be it the appraisal or the purchase price. Nice post!
    Naima Cakirlar Investor from Hauppauge, New York
    Replied about 5 years ago
    Does any one have any suggestions on commerical banks that work well with investors in ct, oh, ny and fl states. If possible 3-5 banks would be helpful thank you
    Courtney Marous Commercial Real Estate Broker from Charleston, South Carolina
    Replied almost 5 years ago
    Great article. I practice CRE in South Carolina and only deal with Industrial-Flex properties, but in my experience, if obtaining bank financing, the lendor will also require an environmental Phase I & II be conducted on the property. Most banks/institutions will have specific requirements that may vary from bank to bank so it’s wise to incorporate this conversation into the above. Interested in learning more and thanks again for sharing! -CLM
    Matt K
    Replied almost 5 years ago
    This is a very well written blog post – as a CM Banker, I would say the one place I run into issues is on the credit of the borrower – in addition to items 6 and 7 I would insert “What is the minimum credit score required”. This is typically somewhere between 640-680, at a MINIMUM, but some programs have very strict guidelines and may require higher. If you are dealing with a bank, they are often driven by regulation (read: what won’t raise a red flag with the a regulator) and will often shut down a loan request at the door because it’s not worth the perceived head ache – hence the reason to use a broker who will know a lender willing to work with a little bit of hair on the deal – often at a slightly higher interest rate. In MN, what would be a standard 5 year rate of 4%, might raise to 4.75-5%. For the record, the lowest credit score I’ve seen a bank lend on in the last 12 months is 589. (5 years fixed, 20 year amort, 4.85% – multifamily property in MN). There was obviously a story to the credit score that the bank was able to get comfortable with before lending… Other quick responses: -Michelle: Personal financial statements and yearly requirement per banking regulations – Banks need to keep tabs and prove they are keeping tabs on their borrowers! -Courtney: If a Phase 1 or 2 has previously been ordered and you still have a copy, a good mortgage banker/broker SHOULD be able to negotiate with the title company the use of the previous report, cutting out the additional $1,500-$10,000 requirement – if nothing material has changed to the property Great Post Michael
    Brad Stuteville Lender from Amarillo, Texas
    Replied almost 5 years ago
    Great Blog post!
    Pacific Lifestyle Homes
    Replied over 4 years ago
    Hey Michael Blank,Thanks for a great article.You have shared very useful article.You can also add “how do you handle rate locks can tell your broker to fix a certain rate on certain date.if rate dips by lower rate then your broker must fix it in lower rate.”
    Brian Wise Investor from Philadelphia, Pennsylvania
    Replied over 4 years ago
    Great questions. I would also ask what DSCR (Debt Service Coverage Ratio) the bank will require. It could be 1.2 or 1.25 but I would just ask to be sure so numbers on proforma are accurate.
    Jeffrey Almonte Rental Property Investor from Los Angeles, CA
    Replied about 3 years ago
    Thanks for the informative blog post Michael, this is very helpful!
    James Anderson
    Replied almost 3 years ago
    It’s surprising to know that some lenders require 6-9 months of interest payments into an escrow account before financing in one’s commercial real estate can be provided. We are planning to buy a property for commercial purposes but we haven’t got in touch with a financing company yet. I’ll make sure to ask this question so that we can be more informed about the amount of money that we need to have before our loan can be approved.