Financing a Condo to Fix then Rent

[Adam DAnna]

I am looking to finance a foreclosed condo in Mercer County, New Jersey.

- Purchase Price: $92,000

- Repair Budget: $25,000

I was quoted the following terms with a Homestyle Renovation Mortgage:

-Total Loan Amount: $96,040 

- Interest Rate: 5.125%

- Origination Fee: 3.50% ($4,356.40) 

I am wondering if these loan terms (particularly the high origination fee) seem fair. Am I better off looking for a Hard Money Lender then refinancing when the property is rented out? 

I appreciate any and all feedback. 

[Joseph Scrocca]

Based on the recent market movement (conventional rates have gone up over .50% since the presidential election) and the fact that this is a Non Owner Occupied Home Style Renovation loan and the loan amount is under $100,000.00 the rate and origination fee sound fair. The other component that is figured in is your credit score (don't post it) but generally you pay a higher rate/higher fees if your credit score is below 760. The bottom line is that if you are looking to hold on to this property for a while and it cash flows at this rate (assuming this is a 30 year fixed rate loan) you don't want to go hard money. It is more expensive and generally short term so you would have to refinance down the road. This is the cost of the investment. If it makes sense, go forward, if it doesn't re work the numbers and go to your lender with a counter offer that makes sense for you. If it's workable they will cut the rate and fees. However, the numbers you have here are not outrageous for this program. Good luck!