Points on a small loan?

Question

I'm looking to purchase my first investment property in the 50 - 80k range. I've talked with a few lenders, and it seems that I will be hit with up to 5 or more points because of the small loan amount, my credit score (690) and only 80% LTV.

Is this pretty typical for a small loan? Can I expect most lenders to hit me with this many points in my situation?

Thanks,

Asher

Is this pretty typical for a small loan?  Can I expect most lenders to hit me with this many points in my situation?

Thanks,

Asher

Bill Gulley · Answer

I suggest you not ask about points when you're sitting in front of the lender/loan officer. 5 points on a 50K loan is excessive. Ask them how many points on a 100K loan and offer the same thing. 100K loans can be just as much of a pain or even more than a 35K loan! The lower amount can provide the same or nearly the same for servicing by raising the rate an eighth of a   point, any higher is adding to the premium paid to the originator. Ask some brokers as well as banks and credit unions. Good luck

Ed O. · Answer

I suffered as a loan officer for 2 years. The challenge you're going to face is that originators are often paid as a % of the loan. When you're talking a 50k loan, there's not much money to be made on the deal. Beyond that, the originator is usually only going to get half of the commission as well. So, while it sounds like a lot, it's a pain of having a smaller loan. That being said, there's probably better deals out there. You also may have a tough time getting a tip top rate, as there are pricing hits on smaller loans as well.

Shop it around and tell the people you talk to that you're actively shopping looking for the best deal. If you don't tell them this, I promise you will not get the best deal you can. I have been on both sides of the phone for this conversation.

Hope this helps.

Dave M. · Answer

Nope...

http://abbafirst.com/north-carolina-mortgage-rates-08.php

I used them for an investment property refinance a few years ago and was pleased with rate and fees. That link shows minimum loan size of $75k but my loan size was $55k so its worth a call.