Is my Lender charging me Higher than normal fees?

Question

I am securing an off market deal in Anne Arundel County Maryland. Because it's my first deal, I think my lender is charging me high fees for settlement purposes. For example, appraisal fee is $650 and when I questioned him, he stated "investment properties usually cost more to appraise" which sounded pretty fake to me but I don't know any better as of current. My parents bought an expensive home last year and there was no wire transfer fee but he's charging me $40 for it. Underwriting fee - $575, Processing fee $495. Settlement Fee $950, Survey Fee $250. And what the heck is re-inspection fee (charging me $175) for? This lender already has put a hard hit on my credit score but if he's charging me too much $, I will leave him and find a new lender. This property is very close to Baltimore county.

Property price $110,000. Interest Rate 4.9%

Thank You.

Chris Mason · Answer

Hi @Lakshay G.,Some food for thought. - Mortgage credit inquiries are not a concern, nor do they have a "hard" impact on your credit. I've literally never seen anyone with bruised credit due to mortgage inquiries. People that don't want to take responsibility for the car repo and late credit card payments blame the credit inquiries when you ask them, but the credit report itself tells the full story 100% of the time. Nine out of ten people trying to hide their credit from a mortgage lender (we are housing providers, just like you as a landlord), they are hiding their credit for a reason, so be careful that you don't come off to lenders the same way a tenant applicant hiding their credit from you as a landlord, comes off to you as a housing provider. Credit card inquiries are a bit different, and applying for a half dozen credit cards in a month can be a non-trivial ding. Someone applying for a half dozen credit cards a month is signaling to the FICO algorithm that they are probably on a downward spiral and putting rent & car payments on the Visa.- Smaller loan amounts have higher rates. Just like no one advertises interest rates for low FICO scenarios, no one advertises rates that have been dinged for "small loan amount" either. There's a narrow band in the middle with good rates that you typically see advertised, then a "high balance" range where they aren't so good, then a "jumbo" range where they get better again (sometimes we find ways to shove "high balance" loans into "jumbo" for that reason). The good news for you is that 0.25% to rate on $75k borrowed is about $16 per month in interest.- Investment property appraisals, multi-family in particular, are more work than vanilla owner occupant SFR appraisals, and appraisers do charge more. Lenders are audited on a regular basis, and it's millions of dollars in fines if a lender turns appraisal fees into a profit center. The entirety of the appraisal fee must go to the Appraisal Management Company. There are cheapo AMCs out there, and the lender can pick the AMC, but if you go this route to save $75 or $125, please don't make a thread complaining when the appraiser does a half-arsed job and the property doesn't appraise - that's a "you got what you paid for" scenario. Appraisals also get more expensive in high cost areas (Bay Area, DC, LA, NYC, etc) because appraisers have to live where they appraise to keep the commute sane.- The re-inspection fee, if needed, is typically in my area the result of a listing agent not doing their jobs and double strapping the hot water heater, putting CO detectors in, or otherwise ensuring the property is in financeable condition on the day it is put on the MLS, with no blatant health/safety issues, etc etc. If it's an "appraiser judgement call" thing often the buyer ends up paying it. If it's a "listing agent didn't put the CO detectors in" thing then you can often negotiate for the other side to pay it, though it of course is not worth killing an otherwise good deal over $175 no matter what.

Sara K. · Answer

Those sound normal to me. Our appraisal fee on the investment property was also $650, it is true that they are higher. Your appraisal report will include a separate rental comp/market rent rate, etc, report.

Mateusz Prawdzik · Answer

@Lakshay G. From what you wrote the only thing that I think is higher than normal is the appraisal fee. I pay $400 for mine but that could also be because I am in NJ, so I am not sure. Everything else that you are telling me is actually really good....What kind of points are you paying? Underwriting and Processing is right on the head, everyone charges the same amount.. They aren't charging you an attorney fee which I am assuming is because they have their own inhouse attorney. Re-inspection fee is probably for the draws, each time they come out and inspect for a draw inspection to disburse the rehab money back to you, the guy has to get paid.AND on top of all that, you are getting 4.75% interest, where the hell are you getting this kind of rate from? Connect me with this lender please... that is, if he is legit and isn't a scammer. I would definitely bring this guy TONS and TONS of business with the volume that I have been doing this year. Everything that you are writing makes 100% sense, it isn't crazy at all, if anything is better than most people get. What kind of ARV do they lend on and how much of the Acquisition do they lend up to and Rehab up to? Let me know these and I will let you know if these are also good rates and terms.

David S. · Answer

These fees are pretty much in line of what they should be, cheaper than what I have seen in some of my closings. Every closing agent/lender may differ slightly in fees. Some may call things a little different. For example, I don't see an origination fee in your list. I don't see a credit report fee, etc. Some charge for things like wire transfers and some don't. Acquiring real estate with a mortgage substantially increases the cost of acquisition. The difference is thousands of dollars.I think what is important here is building a relationship with a great lender. I have stuck with certain lenders even though I may have saved a few dollars somewhere else. I am not going to let a reasonable lender do 10 hours of work on my file just to go somewhere else to save $200. That would just burn a bridge. Sometimes talking with them may get a reduction, as some lenders have a price match policy. That may be worth it.

Michael Cohen · Answer

He's correct; appraisals in MD are $475 for primary residences and $600 for investment properties. And as @Chris Mason mentioned, lenders are worried about being audited so if they're even mildly reputable, the charges are going to be reasonable. If you have concerns, however, change lenders. The "hard hit" is a misnomer - you're not going to get turned down by your next lender because of a mortgage inquiry. I won't rehash the credit conversation further, but it really does not make an impact.

Chris Mason · Answer

- Your consent is needed to run your credit. Lenders are following the rules. This is a good thing. Technically EVERYONE is supposed to get your explicit consent to run your credit if you do not already have an account with them (a "soft pull" is when an existing creditor is a "subscriber" to your credit, gets a fresh copy on a monthly basis, and double clicks to open it... you don't know this is done just like you don't know who opens your yellow letters, if you send them), but mortgage lenders face greater regulatory scrutiny, so we tend to actually follow the rules. - No one has a perfect credit score.- If you do not have a perfect credit score, but have unblemished credit, the credit reporting agencies still MUST give 3 reasons why you do not have a perfect credit score. 815 v 795 is normal month to month variance. Everything over 740 is treated the same.- Thus, 100% of credit reports for people with rock-solid credit say "too many credit inquiries," even if there is literally only one credit inquiry in the last two years. I challenge anyone here to find a >780 FICO creditor's (eg, not credit karma) credit report that does not have this comment on it. :)- I have no idea what would appear if you literally had a perfect credit score. Never seen one. Always see the three reasons, one of which is going to be "too many credit inquiries" if the credit reporting agency is just making things up to comply with the rules.- If you have bruised or new credit, and three legit reasons exist, then those will appear, and "too many credit inquiries" may drop off.

Russell Brazil · Answer

Your credit report could have had zero inquiries in that year and a half and still dropped. Every single month your credit is going to change. As accounts and the length of your credit history age you are continually rebucketed. So even if not a single thing on your report changes other than time advancing, you can have your score drop or even go up as you are continually rebucketed.

Account Closed · Answer

Only way to know is to shop around

David Weintraub · Answer

an AMC tacks about $100-150 onto a standard appraisal.Plus, a lender has to run both an ARV and "as is" scenario, so it's more work.

David Weintraub · Answer

Our company uses an AMC that charges $525 for SFR, and we have to use one. Do I think AMCs are useful? Even though I hate the process, yes I do. They're a barrier between you and the unethical. And while I believe most lenders tend to the ethical side, it's the people who aren't that force us to create rules/regulations to protect everyone else.There does seem to be some nick-nack fees there, but all told, at that rate, it seems like you should just zip the lip, grab that cash, and RUN! :-)