Welcome to part two of our series!
Today we’re going to dive into junk fees – hard money fees that aren’t necessary to funding your loan but that you’ll often come across. We’ll explain which junk fees are essentially duplicates and which fees go to whom.
Last week we talked about a few common hard money fees you can expect to come across when taking out a private, or hard money, loan.
To recap, you can typically expect to see some type of documents or processing fee, draw fee, extension fee, and origination fee throughout the course of your loan.
The doc/processing fee and origination fee is typically due at closing when your loan first begins.
The draw fees happen throughout the project when you put in a request for construction funds, and the extension fee (if there is one) is applied if your loan goes over its expected term and you need a little more time to get it funded.
Many hard money lenders charge various other fees, some less common than others.
You won’t always run into junk fees, however, you might run into duplicate fees. Often, two differently named fees mean the same thing or go to the same person. We’ll help you learn how to spot them here as well!
Here’s a list of junk fees, or duplicate fees, you might encounter:
- Appraisal fee
- Attorney fees
- Broker fee
- BPO fee
- Certificate fees
- Credit report fee
- Escrow tax account fee
- Legal Fee
- Lender fee
- Lender inspection fee
- Loan processing fee
- Payoff processing fee
- Underwriting fee
- Upfront fee/commitment fee
- Underwriting fee
- Wire fee
BPO and Broker fee? They both go to the broker. BPO simply means “broker’s price opinion” and it sometimes takes the place of an appraisal, however, it’s less thorough than an appraiser and brokers are not subject to the same types of licensing and certifications as appraisers.
Do you have an appraisal fee and an underwriting fee on your loan? You shouldn’t! These are essentially the same thing. If a lender is getting an appraisal, that means they aren’t doing the underwriting themselves, and vice versa. This is just a way to double charge.
Similarly, a document or processing fee should cover the underwriting costs. Make sure you’re not charged a doc/processing fee and an underwriting fee. If you are, ask your lender about them!
Attorney fees and legal fees are the same things. They cover legal expenses the lenders might incur. Attorney fees aren’t charged by all lenders but they are a common fee.
Certificate fees are sometimes lumped together, sometimes charged one-by-one. They are typically flood certificates or home warranty certificates. While flood certificate fees are legitimate, they are typically such small fees that many lenders will cover the cost of them from the origination points.
Home warranty certificates are useless because the point of purchasing a house to flip is to upgrade and improve it. A home warranty certificate ensures that this work has already been done, which, at the time of purchasing a house to flip, has not.
The same goes with a credit report fee. Many lenders do not require a credit check, but for those who do covering the fee themselves, again from the origination points, is typical.
An escrow tax account fee is a total junk fee. It’s an unnecessary fee charged by your lender to set up your escrow tax account. Any outstanding taxes owed when you sell the house will be paid – title insurance ensures this. Hard money loans are typically meant to be less than 12 months in length – so there shouldn’t be a need for this type of fee.
Lender fees, lender inspection fees, loan processing fees, payoff processing fees, wiring fees. These are blanket fees that lenders charge to get a little more profit. Some are legitimate fees, such as the wiring fee, but many are fluff.
Even legitimate fees, such as the wiring fees, are often covered by the lender as part of the origination fee because they are so small and not necessary to take onto borrower’s expenses. You are already going to pay origination points, so there’s no reason to pay separate lender fees.
What you can expect from us…
At Loan Ranger Capital, you won’t find any junk fees or duplicate fees. We charge a $595 doc fee which covers underwriting, filing, and everything else that goes into getting your loan funded. We charge 2-3 origination points as our fee.
The only other fees you will encounter are our draw fees, which are $125 and cover the cost of inspections and banking fees, and, possibly, an extension fee. Sometimes, depending on the loan or length of time needed, we even waive the extension fee.
We want the entire loan process, from signing to closing, to be simple for you – we aren’t trying to charge you an arm and a leg to finish your project. We just want to help you succeed!
If you have any questions about loans or fees, please feel free to leave a comment below or send us an email at [email protected]
Until next time, thanks! And Happy Holidays!!