Commercial lender wants to charge 2 points plus $2795 app fee on a fixed 5.75% 30yr.
I have a 750 fico total cost is $330 loan is 280k. I thought this was a hot deal just wondering if you guys are getting better deals on similar loans right now. Please advise. Thanks.
less than 20% down?
seems OK to me... app fee up front with no guarantee... I would not want to spend 3k unless I knew for she these guys were VERY real...
Wouldn't do the 2,795 app fee.
Could be a direct lender or just a point taker. The app fee equals about 50% of the point fees they are going to take so red flag.
You run into daisy chains where people are just affiliates of a lender and have no clue how to underwrite a property or loan. They can just keep taking fees and never close anything.
2 points PAID at closing is not out of the norm for a deal this small. 280k loan is very small.
I do larger commercial deals transacting. I have a hard time these days getting lenders to work on 5 million loans minimum. They have 50,100 million single property loans in the pipeline. They tend to get 1 point on those larger deals.
Friend of mine just closed a larger loan last month. After splitting with his boss he made 334,000 fee for his portion.
Yeah that's exactly what I figured $2795 only at closing and not upfront. 2 points sounded right on the loan amount. I wasn't sure if 5.0-5.25% was possible right now?
I think with your fico score, it's probably not the best deal you can get , point's wise. But as far as the application fee goes, most everyone is charging for your third party costs upfront. Usually $2500 to $4000 for your appraisal, inspections and maybe title work. Even national banks as direct/portfolio lenders. But there's usually no points charged though. But application fees that do not specifically cover 3rd party report costs should be avoided.
Thanks Robert. You were correct $2795 included 3 separate appraisals 1 for each 4 plex. I believe this was about $700 a piece. I will see where the rest of the funds were allocated but at the end of the day there are costs no matter where you get the loan. If you know of a lender charging less than 2 points for a similar deal let me know what but I thought it was about right.
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If you are dealing direct with a local bank that is different than a mortgage broker.
The mortgage broker you may or may not know who the actual lender is when starting. Many take junk APP fees.
It's common to say the deposit will cover this and this etc. You want to make sure this goes to the lender and is dispersed directly to companies performing the report. Their have been con artists that never order anything and take the money or another scam is to inflate the cost of the reports and eat up your deposit from what is actually charged.
The appraisal is one of the later things you want to order in the process. The lender usually wants it right away but I want to verify the sellers financials and look at the inspection report. If I want reductions on inspection and seller says get lost then I would have to eat the appraisal costs. With inspection if you choose the person you usually can get a discount for the second property when the first does not work out.
Everything is generally negotiable to your comfort level. Small and local banks like the small commercial loans in their backyards. They are close to the property and it allows them to loan out on commercial with smaller overall risk exposure to their book of business. They might can hang out a loan longer before it comes due because the balance is so small versus deposit levels at the branch.
I usually do not do much business with banks on commercial because simply what they are offering I really consider crap loans for the deal size we do.
Had a president of the bank call me the other day selling 3 to 5 year fixed loans with 20 year amort. and full personal unlimited recourse with 30% down. He was selling it like it was the greatest thing since sliced bread and I should sell my clients on it. I politely told him I get incredible rates and terms from non-bank lenders and this wouldn't even be on my radar screen.
The only time I look at local banks is when it is a value add smaller type deal that other lenders do not want. In that case I try for interest only to keep payment small with no pre-payment penalty and then cash out once stabilized. You have room in a rising interest rate market to refi or sell off generally once the cash flow stream and occupancy is improved. I do not like short term loans for regular properties. Those are great for banks but stink for the borrowers. I would rather let my cash sit than buy into a bad loan with onerous terms.
FWIW, I think 2 pts is pretty reasonable on a deal of this size. Would definitely be careful as well on the app fee - if it is in fact covering third party costs you are right, those are inevitable. However agree with what @Joel Owens said regarding jumping too quickly to an appraisal. I would want to know the deal is basically approved, subject to the appraisal, before paying for those reports. Every lender is a bit different in how they approach that, but you definitely want to check off all the other underwriting boxes first, if you can, before incurring those costs.
Thanks for the tips guys. Just fyi I used to sell subprime loans so I'm always looking out for junk fees :)
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