I'm currently under contract for a turn-key investment property in Baltimore City that is valued at $129,900. I just received the documents from my lender showing total estimated closing costs of $12,400, making the estimated cash to close $38,400. I am putting down 20%.
$8,200 closing costs
$3,600 prepaids
The interest rate is 5%, almost $4,000 origination charges. I feel like it is too much? Should I look for another lender?
I'm only at my learning/saving phase on this and even I would even look elsewhere as well. Probably shop around for at least 2 more lenders if not more. Part of due diligence, right. By my calculation 12400 to 129900 is 9.5%. Last I check is that the average closing cost in Bmore city is about 3.5%. Would not hurt to shop for more lenders.
@Ethan Kramer ask them to provide a sample settlement statement with estimated costs by line item. What type of loan is this? Is it a conventional mortgage or some type of commercial loan? Take out the $4000 origination fee and drop the rate below 4% and you are more in the realm of reality.
Definitely shop around. Lender's are competitive, especially when they see another offer on the table. I hate closing costs more than anything else as a young, newer investor. I will slightly up my offers to have the seller pay more at closing whenever possible.
I'm currently under contract for a turn-key investment property in Baltimore City that is valued at $129,900. I just received the documents from my lender showing total estimated closing costs of $12,400, making the estimated cash to close $38,400. I am putting down 20%.
$8,200 closing costs
$3,600 prepaids
The interest rate is 5%, almost $4,000 origination charges. I feel like it is too much? Should I look for another lender?
I rather get a little higher interest rate than paying 4K out of pocket.
@Ethan Kramer ask them to provide a sample settlement statement with estimated costs by line item. What type of loan is this? Is it a conventional mortgage or some type of commercial loan? Take out the $4000 origination fee and drop the rate below 4% and you are more in the realm of reality.
Conventional mortgage. Thinking the same thing, thank you so much!
@Ethan Kramer that's high brother. 4K origination is not good at all. Look at other lenders commercially. Lima Capital is a group and has treated me very fairly on HML, rental loans and portfolio loans.
@Ethan Kramer Yowie. Are your attorney's fees included in that? Was there anything particularly unusual about the deal such as a phase 2 environmental etc?. I would call and ask for an explanation of the charges on the settlement statement before you call around, so at least you will compare applies to applies. You mention both 3600 in prepaids and 4000 in prepaid taxes so I'm a bit confused. I'm not a big fan of shopping rates and terms for .25%s and a few hundred bucks but that is really pretty steep. How is your credit? Those seem pretty punitive terms at 20%. Its a small loan, so I'd imagine fees are high but...
@Ethan Kramer Yowie. Are your attorney's fees included in that? Was there anything particularly unusual about the deal such as a phase 2 environmental etc?. I would call and ask for an explanation of the charges on the settlement statement before you call around, so at least you will compare applies to applies. You mention both 3600 in prepaids and 4000 in prepaid taxes so I'm a bit confused. I'm not a big fan of shopping rates and terms for .25%s and a few hundred bucks but that is really pretty steep. How is your credit? Those seem pretty punitive terms at 20%. Its a small loan, so I'd imagine fees are high but...
My apologies, I just reviewed with the lender and the major fees are:
@Ethan Kramer ok so you really can’t count. Most of this against the bank. The transfer taxes are a cost of doing business imposed by the state, insurance etc are prepaid. The bank is charging you just under 4K for the loan. Not preferred customer discount necessarily, but not at all out of line.
You can eliminate all of the above except transfer taxes if you ask the seller for financing. Have you done that? You might still have a few items like RE tax depending on when they collect it. Unless it's a killer deal, could be a reason to shop around for other deals.
I found lenders who will charge NO origination charges. You have one loan. Now go shopping. Try better.com: they advertise, no lending fees, no commission.