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The 3 C’s of Lending — What Lenders Look for When Approving a Loan for Commercial Real Estate

Whether it’s Brooklyn or any other location in New York City, when it comes to buying commercial real estate, the loan is an important consideration. Once you have done your research to find the best commercial real for sale in Brooklyn, the next step is to get pre-approval for a loan. There are a variety of things that lenders look for when approving a loan for commercial real estate. Here are 3 C’s in the lending process that you should be aware of-

  • Capacity

The first C is Capacity — your ability to pay back a loan! Lenders determine your ability to pay back a loan by your income, debt-to-income (DTI) ratio, and job stability. DTI is your total recurring monthly debt divided by gross monthly income. A ratio above 35%could mean a loan denial, or you might end up paying more interest. To increase your chances of getting a loan for commercial real estate in Brooklyn, work on improving the DTI ratio by settling your current debt, avoiding any other big investment, such as a car or any other valuable item, and more. A real estate agent can also offer you guidance on your best financing options.

  • Character

The second C is Character — how you have handled debt obligations in the past! Your credit score plays a crucial role here. Lenders use it to get a fair idea about your payment behavior and history with credit management. A lower credit score means your bills are due for months or your accounts are not in good standing. Most importantly, it may reduce your chances of getting a home loan. However, there are also lenders which provide loans for a lower credit score as well — based on certain conditions. If you don’t have a good credit score, seek help from a professional on ways to improving it.

  • Capital

The third C is Capital, which determines your financial strength. It refers to the money you currently have — or will have — to buy a commercial property for sale in Brooklyn. The larger your contribution, the better, as it makes lenders more comfortable in extending credit. Though it’s not always the case, property buyers making a down payment, for example, have a better chance of obtaining loan quicker. It also avoids the need to buy private mortgage insurance (PMI).

So these were the 3’Cs of lending which lenders look for to approve a loan application. Partner with The Turner Realty Group for hot commercial properties for sale in Brooklyn and quality assistance on the real estate buying process.


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