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If you plan to buy a house soon, chances are you have been searching online to learn all about the process. You probably know that you’ll need to make an offer on a house that you like, apply for a home loan called a mortgage, and go through an approval process.
What you may not know is that there are different types of mortgages. Depending on your situation and the type of property, one type may be preferable. If you are buying a home with multiple units, you might be wondering if a commercial loan is right for you. Here are the main differences between residential and commercial loans.
Residential loans are best for those who plan to live in their home themselves. Some residential loans even require that the person taking out the loan occupy the home for a specified amount of time before renting it out. The approval process focuses on your personal financial situation and requires that you submit tax records, income statements, and other financial documents.
Commercial loans are best for those who intend to run a business in the property. This can be a retail business, such as a storefront or restaurant. It can also be an online business or even a rental property business. Getting approved for a commercial loan can take longer, since lenders want to see the financial history of your business as well as your personal financial information.
Some lenders specialize in residential mortgages while others deal more with commercial. It is important to talk to multiple lenders to see who can best fit your needs. Generally, commercial loans require more paperwork and scrutiny than residential loans, but that may not always be the case. One of the best ways to set yourself up to get approved for a commercial loan (other than maintaining excellent credit and records) is to develop an on-going professional relationship with a local bank so that they can help your business grow.