How Do Commercial Loans Work in the DC Area?

If you are looking to invest in one of the top real estate markets in the U.S., you can’t go wrong with choosing Washington, DC.

While other states continue to battle job losses and uncertainty brought about by the pandemic, the DC metropolitan area remains strong due to continuous government spending and booming population growth. The area’s population has grown by 14.6% in the last ten years, two times the national average. 

Washington, DC, has grown at a fast pace, and it continues to attract commercial real estate investors.

Though there may be challenges ahead due to inflation which is near 40-year highs, there are silver linings in the commercial real estate market in DC.

Trends to look out for this 2023 includes multifamily and industrial properties. The E-commerce boom has created a need for more warehouses and industrial space. On the other hand, multifamily units remain the highest-performing of all asset classes.   

We understand your excitement about investing in DC, but you need to know your financing options before you dive in.

A commercial loan in Washington, DC, is a good option for funding your next investment. Let’s see how commercial loans work in the DC area and determine if they fit your specific needs.

What are commercial real estate loans?

A commercial real estate loan is a loan product used for business purposes. 

These loans differ from residential mortgages regarding rates, terms, collateral requirements, and underwriting. 

Eligible property types for commercial real estate loans include office, hotels, retail, restaurants, medical, entertainment, and specialty properties.

The risk is higher for lenders who provide commercial real estate loans, which is why credit score, down payment, and income requirements are higher than conventional mortgages.

Interest rates are also higher, while loan terms are shorter. A 30-year fixed-rate mortgage is one of the most popular loan types available for residential properties, most commercial property loans, on the other hand, have only five, seven, or 10-year terms. 

If you want to know the current commercial mortgage rates vs. residential, our loan officers can help. Contact them for more information today.

Who needs a commercial real estate loan in Washington, DC?

You may think that commercial real estate loans are only for those who invest in commercial properties. These loans can also be used to improve properties used for business.

Here are some scenarios where a commercial real estate loan may be your best option:

  • Purchasing a new office building for your business

  • Expanding or relocating retail space for your store

  • Buying a new warehouse to store your inventory

  • Buying, renovating, or building a hotel that you will run when finished 

To get the best deals, contact a commercial mortgage broker in Washington DC.

How to qualify for a commercial real estate loan?

Getting a commercial loan is different than qualifying for a home loan. If you own the property, you need at least 25 to 30% of equity since it will be used to secure the loan. On the other hand, if you’re buying a new property, a down payment of 25% or more is usually required.

Lenders will also ensure that you have enough property insurance to protect against property damage and check your title to verify that there are no liens or other claims against the property.

Income is another metric that lenders will focus on when applying for a commercial real estate loan. You must show lenders that you have enough money to make your loan payments relative to your monthly expenses.

Submitting two years of tax returns and other proof of income may be required to establish the stability of income sources. Your business should have been operating for the past year or two to increase your chances of getting approval.

Lastly, lenders will check your personal credit scores; a minimum of 660 to 680 is preferred.

Are you ready to get started?

Commercial loans are more complicated than conventional mortgages and can overwhelm first-time applicants. To lessen the stress on you, working with a trusted and experienced lender can go a long way.

The Mortgage Option in the DC area is one of the leading commercial mortgage lenders offering commercial loan products for those who plan to buy commercial real estate properties in Washington, DC.

Get in touch today and get the best rates and terms. You will surely enjoy our simplified application process and fast closing.

Call or message me so we can get started.


* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.

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