Can Someone Help Me Decipher This Lender Offer?

Question

I'm still new to this. Can someone thoroughly explain these terms?

65% ltv max of the PP due to fico & 4 Plex, 40/3, 10.99-11.99% (will firm up upon receipt of the appraisal) , 6 mos pp, 2 points & $1300 lender fees

Robert Leonard · Answer

@James Spence here's how I read it:

65% Loan To Value is the maximum amount of the Purchase Price they will loan you, due to your fico score & the condition of the 4 Plex.  They will offer a 40 year amortization/with a 3 year balloon (or rate adjustment).  The interest rate will be 10.99-11.99% (will [determine actual interest rate] upon receipt of the appraisal of the property) .  You will have to pay 6 months prepaid (?), 2 points [2% of the purchase price] & $1300 lender fees due from you at closing.

I'm not sure what the 6 months pp is?  Otherwise, that's what the rest of what you posted should mean.

Dylan W. · Answer

This is not a great loan. With terms like that in today's market you might can probably find a much better deal with an equity partner or even a hard money loan. Best of luck to you, but my advise is to keep shopping.

Account Closed · Answer

Just to be clear I was really commenting on the lender or broker not being able to explain all their abbreviations.  To me that's a red flag that it was just some broker possibly and the loan may or may not have the ability to really come through.  I do think that money is more expensive than bank financing, but a few years ago I was not in a place to do bank financing and did several hard money loans where the numbers worked for rentals.  I purchased a quad, a few duplexes, a 14 unit building, and a 10 unit building all with hard money and then later refinanced into bank loans or sold them as performing assets to other investors.  I think if the numbers work then go for it-- I was commenting on the  actual conversation you were having with this lender.  In my experience, only the loan brokers talk in abbreviations like that or if a lender does as well, they are more willing to explain it all.  Just my opinion but I hope it works out for you.

Ben Stoodley · Answer

Seems high to me as well. Obviously it depends on your market area, but I know all the lenders out here including us don't jack up the rates for MF, we keep it the same across the board. The security is in the real estate, the deal itself. Shouldn't be any higher than 12% in my opinion.

Cal C. · Answer

Are these typical hard money terms for MF?  It is obviously not any kind of conventional financing with those interest rates nor is it the typical hard money loan on a single family ~5 points, 12-16% interest, and 6-12 month loan period.

Bradley Benski · Answer

Ditto what the others said.  If the deal is good you should be able to find other less costly financing.

Shaun Weekes · Answer

Hello James,

The PP is probably pre payment penalty ( which a lot of lenders don't do any more ) and I agree with Bryan A. that you should find another lender.  This seems really high and you can find someone that will do this with no Pre Payment Penalty.

James Spence · Answer

Thanks Robert. Awesome rundown!!!

Can Someone Help Me Decipher This Lender Offer?

Most Popular Reply