Hard money loans what is the cost upfront

15 Replies

It depends on the Lender. Lima capital one for example covers 90% of purchase and rehab costs, max loan to ARV is 70%. Their origination fee is 1.5% - 3.5% depending on how many deals you have done and their interest rate is 8% - 12% depending on your experience. Contact Taylor Langford with LCO. She is always super helpful and will be able to explain everything to you.

Generally, yes. Hard money loans usually require a down payment, plus origination points, and normal fees. Because they dont front the renovation costs, hard money lenders require you to pay for the reno costs upfront, then reimburse you after an inspection. Some will also require reserves of 3 to 6 months of PITI payments.

I work with hard money. IF they charge you a fee upfront that is wrong wrong wrong. MY company does a due diligence fee that is taken off the closing costs. Our average interest rates are between 5-9% with a closing at 2.5-5 points, most LTV fall between 65-85%. We also do equity loans that are 100%. I can do a special military loan right now at 100%, 4% interest so things are different with everyone. Fees are bad, due diligence coming off closing costs are not bad at all.

I hope i explained this correctly and answered the question. If I am unclear please @Micheleb me here and I will respond again. 

@Creig Griffin

What you can expect, typically, would be to put down any where from 10% - 30% on purchase.  Some companies may lend only 80% - 90% on construction but most do 100% construction now.

Origination fees any where from 2 - 4 points.  Some charge more if they perceive more risk, some charge as little as a point if you have a lot of experience and a great deal.  On top of your down payment, I would always earmark 10K for closing costs.  And more than that if you are looking for 300K+ loan amounts.  

Most HML have an attorney fee and maybe a processing fee or something of that nature due at closing. But as mentioned above, stay away from any company charging more than a simple credit check fee up front.

Two types of upfront costs:

- Before Closing: Only thing that should be charged here is an appraisal, and most of the time this gets paid directly to the appraisal company, not the lender. I've also had some lenders pay for it themselves and then put it on the HUD (i.e. at closing). Most lenders who charge anything else before closing (especially in excess of a couple hundred dollars) is a scam, but some may be legit. However, I don't really see a point to go with any lender charging you anything upfront since there's a multitude of them out there who don't.

- At closing: Down payment, points, other lender fees, prepaid insurance (most lenders want you to prepay for either the length of the loan or a full annual payment), prepaid interest (usually interest till the end of the month), and standard closing costs (from your closing agent). Down payment, points, and fees vary based on the lender and their LTC/LTV requirements. Down payment be as low as 10% down for new investors. Most 100% financing lenders are scams, but there are a few legit (and pricey) ones out there.

In terms of reserves, usually they want to see you have enough cash to close, 3-6 months of interest payments, and 10-20% of the rehab budget to start the rehab (since most rehab loans are on a reimbursement basis).

@Michele B. Sorry, when I read the message before I read it as the hard money lender that you work with as a customer, not the one that you actually work for. Does your company provide hard money options nation wide or are you state/region specific?

Originally posted by @Michele B. :

I work with hard money. IF they charge you a fee upfront that is wrong wrong wrong. MY company does a due diligence fee that is taken off the closing costs. Our average interest rates are between 5-9% with a closing at 2.5-5 points, most LTV fall between 65-85%. We also do equity loans that are 100%. I can do a special military loan right now at 100%, 4% interest so things are different with everyone. Fees are bad, due diligence coming off closing costs are not bad at all.

I hope i explained this correctly and answered the question. If I am unclear please @Micheleb me here and I will respond again. 

Hi @michele b. could you please share your lender with me in a private message?? Thanks!