Hard Money Loan Estimate

[Wanda Alderfer]

We are looking at a deal and received a term sheet from i fund cities.  This is our first experience using hard money lenders and it seems inevitable since the duplex we want is mixed use with vacant commercial unit.  Our plan is to turn it into residential. (zoning already approved by boro) The terms sheet is not like convention closing sheets and doesn't say what we bring to the table, just what they bring.  The fees seem high and confusing, so could anyone tell me this is all "normal" for this type of lending? I've read a review that this lender backed out at the 11th hour - and if that happens we'd lose our earnest money.

Purchase Price: $150,000

Total Loan Amount: $126,000 (Includes $106K purchase and 20K holdback construction)

Interest Escrow for 3 months: $3178.00

Loan Processing/Application:" $2050 (Not sure what this fee is for)

Broker Fee: $2520

Loan Origination: $2835

Title: $1325

Interest Rate Promised: 9%

So we'd come up with close to $57 K at settlement.

We would hope to fix and rent it within 3 months

Thanks for the help! Assuming rents would be about $1300 each ($2600/month) once rehabbed

[Obed Calixte]

It looks like they are funding 70% of purchase and 100% of construction, which isn't atypical for first timers. Hard money loans do come with a number of fees and they can often be between 1-5 points, so it's your job to get direct answers from the lender on what those fees are for, when are they paid etc. 

The interest rate falls right within the ranges I've been quoted in the past couple weeks so that piece does not seem out of the norm.

There are a plethora of hard money lenders out there so I highly recommend shopping around and find one that resonates with you and your goals. Ask about what documents and experience are needed for underwriting, what do they look for in a deal to lend on, who will be your point of contact, are surveys and/or appraisals required, what fees are associated with the loan, are there prepayment penalties etc. 

Hope this helps.