Is my Lender charging me Higher than normal fees?

[Lakshay G.]

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]

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.