Top 10 questions you need to ask your commercial mortgage broker

Finding and choosing the right mortgage broker is probably the most crucial first step in securing the financing you need for your property. As you work through your list of mortgage brokers, ask plenty of questions to be sure you find the broker you will feel the most comfortable working with. Keep in mind that the more information about the property and your business plan that you share with a potential broker the better they can assist you.

Here is a list of 10 questions you should ask as you are vetting brokers. Remember that this is just a list of minimum questions you should ask and to also help facilitate the interview. 

1. How many years have they been a mortgage broker and specifically how many years have they been doing commercial lending?  Many mortgage brokers are new to the lending game and most likely working under somebody or through a network and not in direct contact with the lending source. This can really slow the process down, make for a labor-intensive process and add undo stress to you. 
2. Ask them for a Bio and/or resume. Remember, you are hiring them to work for you so just like a regular job interview don’t forget to ask for their experience. This will help you break down their experience and see if they are a good fit for the deal(s) you are working on.
3. How many lenders do you directly work with? You want to look for a broker that has a broad network of lender connections so they can find the best terms to fit your project. Not all lenders will offer the best terms so having a broker with a large network can get a variety of interest rates, amortization schedules and Loan-to-value ratios. A good broker will be able to tell you whether lenders specialize in a certain type of loan, which can help you find financing faster.
4. Can they give you references from Fannie/Freddie direct servicer sellers? Since your broker is working on your behalf, it is always a good idea to speak with someone about your broker's experience. Since most real estate investors are looking for non-recourse loans, knowing your mortgage broker has experience around these products is worth the extra phone call or two. 
5. Tell me about all the costs and fees associated with using you as my broker. Ask the broker to break down all the fees and costs you will be expected to pay.  The last thing you want is a surprise at closing. As an example, some mortgage brokers charge upfront fees and expect you to pay regardless if the deal goes to closing or not, while others will collect their payment after you have received funding. Also ask them about other associated costs with the deal to include, appraisal, environmental reports, legal fees, etc… 
6. What size loans do you typically do and where? This is important because, if you bring a deal to a broker and it’s for say, $2M but they only source lending on deals greater than $10M then this is obviously not a good fit. Same goes for location. Not all lenders will lend everywhere, so having a broker that is familiar with the market you are investing in is important. 
7. What kind of loan products do you provide? The more products a broker has access to the better! Some lenders specialize in a certain product while others provide one or more loan types. Examples of loan types: Conventional, FHA/HUD, Bridge, Fannie Mae/Freddie Mac, and construction loans. 
8. What is the typical time I can expect to close after the appraisal is ordered? Make sure the broker has a good idea the time frame it takes each of his lenders to close. A typical loan takes 45-60 days to close from the time the appraisal is ordered. Some lenders can do it shorter and some take longer.  This is important to help you plan your deal. 
9. What process do you use to find the ideal lender for my project? You should know how the broker will source the funding for your deal, are they shopping it around through a network to see who might be interested or are they targeting specific lenders based on your needs? 
10. Do you invest in real estate yourself? It is important that your broker understands the needs of an investor in terms of securing the best financing for the investors strategy. It is not a deal breaker if the broker does not actively invest in real estate but more of getting them to talk about their experience and ability to secure the best lending terms for your business plan.  

Choosing the right broker is a very important step to getting the right financing you need for a project. Make sure you keep copious amounts of notes, and then add the answers to each of these questions into a spreadsheet where you track the answers from each broker. It will become difficult for you to keep all the information straight and remember which broker said what, if you neglect this part. It is important for you to ask plenty of questions and I recommend vetting numerous brokers until you find someone you feel comfortable working with. 

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Special thanks to 

John Romero from Synago Commercial Capital and Jason Appel from Eastern Credit Union for their help in providing the information in this blog.