I happen to come across a loan that charges 4% fix, is it too good to be true?
Also, one of the terms is: "Borrower are to provide processing fee of the loan amount upfront after pre-qualification prior to Approval which is to be refunded at the closing of the loan.", is it a normal practice?
Real Estate Broker · Huntsville, AL · Member since 2019 · 1k+ posts · 872 votes
5y
I would most certainly look into it as that's basically a normal interest rate nowadays for some people. However some of these lenders have 30 year fixed rates too so make sure you're reading the right thing.
Rental Property Investor · Surprise, AZ · Member since 2020 · 405 posts · 179 votes
5y
@Yin Choi
I would make sure you screen the lender before you move forward. I have heard of people losing money like that by paying a processing fee. Who is your lender.
Lender · Charlotte, NC · Member since 2021 · 218 posts · 117 votes
5y
Paying processing fee upfront for a hard money loan is a no-no-no. 4% is impossible for a short-term fix and flip loan. 4% for 30-year long-term may be possible, needs to look at the points/origination and other fees.
I happen to come across a loan that charges 4% fix, is it too good to be true?
Also, one of the terms is: "Borrower are to provide processing fee of the loan amount upfront after pre-qualification prior to Approval which is to be refunded at the closing of the loan.", is it a normal practice?
Well done for asking. By now I hope you realize: Yes, it's too good to be true.
I happen to come across a loan that charges 4% fix, is it too good to be true?
Also, one of the terms is: "Borrower are to provide processing fee of the loan amount upfront after pre-qualification prior to Approval which is to be refunded at the closing of the loan.", is it a normal practice?
Investor · Waco TX / Conroe, TX · Member since 2017 · 376 posts · 228 votes
5y
If you found it on facebook, someone sent you an email/text or they reached out to you in any other way, then its no good.
There is nobody out there that will be hustling to push 4% hard money loans. Normal terms for hard money in my area is about 10-12% and 1-3 pts. Watch out for other "fees" as well that they will slide into the term sheet because that'll drive up the effective yield.
Rental Property Investor · Barstow, CA · Member since 2015 · 131 posts · 102 votes
5y
Yes that’s too good to be true. Also paying fees upfront is not usually how it works. Look deep into those guys and make sure that they are legit. Good luck
Lender · San Diego, CA · Member since 2014 · 266 posts · 161 votes
5y
@Yin Choi the ONLY time you might pay an upfront fee is for very large commercial deals that require a Lot of underwriting.
For all residential hard money, short term flips OR long term rentals, no reputable lender I’ve seen charges upfront fees
For short term flip financing, traditional hard or private money, rates are generally 8-12% with 2-3% origination and $750-$2000 in processing fees.
For long term rental financing, new to the hard money space, rates START at about 4.125%. They are mainly dependent upon the property LTV and Credit. Assuming the DSCR remains above 1.0, most will finance up to 75% for refis and 80% for acquisition.
In short yes probably a scam due to upfront fees but close to 4% for hard money rental loans is now possible yes!