Origination fee and processing fee

[Ryan Bergren]

I am new to really being able to analyzing different loan products and finding the best lender but this lender was recommended from other investors and property managers. I am under contract on a 3 flat and the loan was sent for review and to sign today 

25% down, 30 year fixed conventional, Loan amount $341,250

Rate: US treasury 5yr +3.2% margin so right now its 7.35% but can increase as the fed continues to increase until loan is fully approved

Pre payment penalty: 5% penalty at year 1 dropping 1% a year for 5 years can pay down 20% principal per year without penalty

Origination fee: 1.5%

Process fee $1500

Those are the big numbers but the origination fee seems a bit high especially when there is also a processing fee which my understanding of an origination fee is to cover the work of the lender. 

I'd appreciate any thoughts. I will go back to the lender I had for my first closing this past month and see if they have a license in my state to see if I can pull a quick quote from them. 

[Alex Breshears]

I think this is relatively common terms, but the thing that is even more important in today's lending environment is the ability to close. Just because you have a pre-approval and a term sheet doesn't mean they can and will close. The environment is very much like the 2nd quarter of 2020. The secondary market isn't buying as much, and definitely aren't overly interested in DSCR as they were a year ago. If the lender needs that secondary market to sell the loans to recapitalize and they can't sell it, then there is a chance they won't have the liquidity to close your loan. Also - underwriting criteria are changing mid-stream on investors - requiring more of a downpayment, higher reserves, better credit scores, etc etc. So while loan terms are a serious factor to consider, right now the big one is can they close.