Evaluating a loan proposal from a lender, and am a little surprised by the “origination” fees. I’m new to this world, so would appreciate anyone who might be able to weigh in.
The deal is as follows:
Term: 5 Years
Amort: 30 Years
Origination Fees: .75% to lender, 1% to broker
Up front fees: $3500 for appraisal and Environmental survey
Additional Points: 1 to broker up front
Closing Costs: $4000
I guess I’m a little surprised by the origination fees, with the broker essentially getting 2 points
I have 780 credit and can put down 30%
In commercial investing your personal credit score has very little influence on whether the lender makes the loan! Commercial properties are approved or denied on the basis of the percentage of FMV you borrow, on the profit and loss statement and on the debt to income and rent / lease rolls.
They would also like to know your education, experience and track record managing similar types of properties and whether your likely to have the capability to manage this property?
A loan origination fee and sometimes points are common and sometimes negotiable depending of course on how much business you do with your lender.
You actually wrote origination at .75% to lender and 1% to Broker so broker is getting 1%.
30% down is pretty standard now in commercial property so having it in cash does not benefit the lending matrix!
Thank you Gold River. To clarify what I meant on the fee/point breakdown - I’m working with a broker. He (his company) is getting 1 point upfront, and another point or “1%” in origination fee…for a total of 2 points, which seems like a lot.
Then the lender (which is the bank making the loan that the broker found) is charging an additional 0.75% origination fee, or 0.75 point.
So all told, broker 2 + lender .75 = 2.75 points.
On top of that, I’m out 3500 appraisal/EPA and 4000 “closing costs”
All told, this is near $20K in fees, which seems like a lot to me.
If your business has good credit and good collateral but the bank still will not budge on the terms, take your business to a lender who will work with your terms.
I think you are simply seeing the results of Reg X revisions. In the old days (2 years ago!), it was very easy to hide the fees in the numbers.
They were still getting healthy fees, probably higher than now. You just couldn’t see them in the paperwork.
Now the disclosure rules and the GFE and HUD forms have changed so you can see what they are making.
I assure you the mortage brokers are not getting rich off you these days like they might have in the past.
But you should definitely take this info and use it to shop around for a better deal. That is the whole point of the new regs, to allow you to shop for services and get a better deal!