Getting a commercial mortgage is not that different from a residential mortgage. You buy a commercial property, using the property itself as the collateral for your mortgage. Just like with a residential mortgage, your commercial mortgage could be for as long as 30 years. And, just like with a residential mortgage, if you go into arrears, your property can be foreclosed.
There are fraudulent lenders in both the commercial and residential mortgage business, too. As a buyer, you should take steps to ensure that your lender is above board, and that you are not a victim of commercial mortgage fraud. There are certain steps that you should take to avoid a fraudulent mortgage situation.
How to Protect Against Fraud
As the buyer, you should take care to prevent being the victim of fraud. Here are some steps you should take before signing your commercial mortgage
- Check out your lender, particularly if it’s a third party lender. Fraud and lack of due diligence are more common among small third party lenders than among prominent financial institutions.
- Avoid paying fees for your mortgage up front. One of the biggest scams in fraudulent mortgage lending is for bogus lenders to request fees up front, to start the mortgage process. Once the buyer pays the fees, he never hears from the mortgage company again. Your loan origination fee and application fee will be paid at closing with a reputable lender. The only fee you should have to pay prior to closing is a fee for an inspector, and sometimes, an appraisal fee.
- Lenders who promise to help you get a property that you know you cannot really afford. If you know that you can’t afford a property, but a real estate agent ensures you that they can “make it work”, beware. One common form of mortgage fraud involves real estate agents who falsify information to lenders in order to obtain larger mortgages than the buyer can really afford.
Be Sure You Have a Good Real Estate Attorney
A good real estate attorney is critical to a successful real estate transaction. Your attorney can help you avoid some of the more common fraud traps and ensure that you have a successful and legal purchase. In addition, you’ll be assured that you have purchased a property you can afford, which helps ensure the success of the business you’ll run there.
