Let’s face it, being a mortgage or loan broker these days is tough. Competition is fierce and increasingly lenders are eliminating broker programs in lieu of courting borrowers directly online (and it’s working). A Small Business Credit Survey released by 12 Federal Reserve Banks last month showed that 32% of loan applicants turned to online lenders in 2018, up from 24% in 2017, and 19% in 2016. Long gone are the days where a broker was the sole gate keeper to unique and competitive loan programs. Residential mortgage brokers are feeling the heat worse than anyone, and to survive they will need to build a robust on-line presence, diversify product offerings and partner with broker-friendly lenders.
Diversify to Survive
There is a lot to be said for doing one thing and doing it well, but putting all your eggs in one basket can also backfire. The current state of the residential mortgage market has proved a tough lessen for those mortgage brokers who failed to diversify their mortgage offerings outside of home loan products. In the past few years the demand for new home mortgages has flatlined, homeowners are renovating instead of selling, millennials are putting off buying homes, and not many people are refinancing out of the historically low rates they already have. If you are a residential mortgage broker it’s likely that your business has slowed or even dried-up altogether. So how do you keep the lights on? Offering your clients commercial real estate loans is a great way to add value while generating a new income stream.
Intermediary or Roadblock?
If you are new to brokering commercial real estate mortgages you should know they can be a lot more intricate than residential loans. A residential mortgage focuses mostly on the borrower’s income, assets, credit score and home value; but commercial mortgages have many more moving parts such as debt-service coverage ratios, occupancy ratios, vacancy and collection loss percentages, cap rates and dozens of other unique attributes. Until you get up to speed on all aspects of commercial real estate mortgages, you want to make sure that your main focus is locating great financing for your clients, while not letting your inexperience get in the way. But don’t be apprehensive about incorporating commercial mortgages into your offerings, partnering with the right lender can make your transition into providing commercial real estate loans a simple one.
The Right Lender for You
Patch of Land is a private commercial real estate lender and a great partner for residential mortgage brokers new to commercial mortgages. Patch of Land has funded over $725 million secured by investment residential and commercial property, and as a private lender can underwrite off of minimal documentation and close fast. The investment residential property programs offered by Patch of Land make it a familiar and comfortable partner for residential mortgage brokers. Patch of Land offers investment residential and commercial real estate fix and flip loans, rental loans, bridge loans and even ground-up construction loans. Patch of Land’s interest rates start at 5.99%, loan terms are fixed for up to 30 years and loan sizes range from $75,000 to $5 million. The multiple programs Patch of Land provides will enable you to significantly diversify your program offerings by working with only one additional lender.
Patch of Land is used to working with residential mortgage brokers and offers loan protection, competitive compensation and great service. Interested in getting on board with Patch of Land? Fill out the contact form here.