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Updated about 8 years ago on . Most recent reply

User Stats

11
Posts
9
Votes
Robert M.
  • Homeowner
  • Chicago, IL
9
Votes |
11
Posts

First-timer with a commercial loan question

Robert M.
  • Homeowner
  • Chicago, IL
Posted

Hi everybody, I'm a first-time rental investor wth a general question about the financing process. I have the opportunity to purchase a six-unit apartment building in Pennsylvania with likely sales price of around $450,000. I've been working with a local financial consultant who says they've found some potential lenders for a commercial mortgage. The next step is for me to sign an financing agreement and pay an non-refundable underwriting fee, so I'd like to make sure everything looks above board before I pull the trigger. The terms of the agreement are:

- Loan amount: $337,500

- Interest rate: 4.75 - 5.25 fixed

- Term: 5 to 15 years; up to 25 year amortization

- Lender's fee: 0-1%

- Success fee: 1.5% of total funds financed

- Underwriting fee: $400

My primary question is: does of all this look standard? Are there any numbers that could be better, or should be red flags? Also, is it typical to enter into this kind of agreement before even making an offer on the property? I was expecting to get a pre-approval, make the offer, and then begin the underwriting process.

Thanks in advance for any advice.

Robert

Most Popular Reply

User Stats

2,317
Posts
1,906
Votes
Gino Barbaro
  • Rental Property Investor
  • St Augustine, FL
1,906
Votes |
2,317
Posts
Gino Barbaro
  • Rental Property Investor
  • St Augustine, FL
Replied

@Robert M.

Hi RObert,

I would question the non refundable fee.  I wouldn't pay anything unless the loan closes.  The terms look standard, but the  rate seems bit high.  The ten yr bond was around 1.8%, so ask them how they price the rate, against which metric.  Try to get the longest term.

What is a success fee.  I assume the lender's fee are the points.  I would go to another bank and compare the terms

Good luck

Gino

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