I am negotiating a multi-unit rental property in Baltimore. In agreement but after inspection I want to re-negotiate. Total loan amount is about $800k depending on re-negotiation result.
Just talked to a loan officer, and noticed I need to pay 1% origination fee to start the loan process. Is that typical? That's $8k hard earned bucks! Are there cheaper options?
Also, what if I pay the fee and in the end they find out some key issues that prevent loan from moving forward. Will I lose this amount?
This is my first time doing commercial loan. Any suggest would be greatly appreciated.
This sounds almost identical to this post. Check this post out
Check the documents, it will list of the terms of the fee and when it can be applied, etc.
@Michael Yan The amount sounds high but ok, you should never pay it up front. It should be paid at closing only.
@Michael Yan Origination fees aren't uncommon at all but you don't pay them to "start the loan process". At least I wouldn't pay a fee to start a loan process. This sounds like a hard money lender (read other comments about a potential scam) versus a loan officer at a local/regional bank. By the way, there's nothing to stop you from going to 3-4 local/regional banks to compare and contrast fee structures, interest rates, amortization periods, etc. Once you're in commercial territory they pretty much carry their own paper so they have more flexibility on terms. Flexibility also means that if it doesn't fit in with what their loan committee believes they should focus on, the flexibility might not be in your favor :-)
HMLs can charge upfront fees
I don't like it but some want to see 'borrower commitment' and that 'contractors get paid up front.'
I argued with a lender who said this and replied 'but lenders can choose not to do the loan after someone else commits!'
He said 'But we are still working.'
@Michael Yan ...as someone who brokers commercial loans, you should never have to pay an origination fee upfront from a broker. That should be paid at closing. I would expect 3rd party fees from the LENDER, but you should not be paying an origination upfront, especially not to start the process. That's sounds like a scam.