A common question asked when working with a hard money lender in Los Angeles is whether there are closing costs associated with a hard money loan.This is an important question that deserves a transparent answer since the costs of a hard money loan can make a big difference on whether it makes sense to actually move forward with securing the loan.
Each Hard Money Loan is Different
It is important to note that each hard money loan is unique and different. As a result, the total amount of closing costs, if any, will vary from loan to loan. There is not a “one size fits all” formula that is used by hard money lenders. One of the primary reasons why closing costs on hard money loans vary so widely is because there are generally six types of hard money financing, including:
- Mortgage Funds;
- Real Estate Offices that offer to originate hard money loans;
- Family Offices;
- High-Net-Worth Individuals;
- Fix and Flip Funds, and
- Multiple Lender Loans sourced by mortgage brokers.
Examples of Closing Costs Associated with Hard Money Loans
The following are some of the most common types of closing costs:
- Origination Fee (also known as Points)
- Underwriting Fee (considered to be a charge for underwriting the loan)
- Doc Prep Fee (this is a charge for drafting the loan documents and are typically paid to a third-party loan processor)
- Processing Fee (this is the charge for loan processing)
- Credit Report Fee (the cost of securing a copy of your credit report)
- Wire Fee (this is typically a lender charge paid by the borrower for wire fee from the lender’s bank)
- Loan Servicing Setup Fee (the cost placed on the borrower to set up third-party loan servicing)
- Appraisal or Valuation Fee (this is the charge for an appraisal, Broker’s Price Opinion, or Comparative Market Analysis)
- Legal Fees (these are the costs for an attorney to review multiple legal entities, make changes to the standard Note or Deed of Trust, or attorney review of legal order to make sure hard money loan complies with the legal agreement)
- Flood Certification (this is the cost to verify that the property is or is not in a flood zone as defined by FEMA)
- Hold-For-Interest Reserves (it is quite common for a lender to hold between 6-12 months of payments in a sub-escrow account to make payments a specified number of payments)
In addition to the above-described hard money closing costs, you should also anticipate having to pay the standard Title and Escrow charges when closing a loan.
Need a Hard Money Loan in Los Angeles? Contact the Highly Reputable PB Financial Group Today
PB Financial Group is a premier direct hard money, private money and bridge lender, who has been providing quick funding since 2006 and have funded over 2700 hard money/private money loans. Our objective is to work to satisfy your financing needs on important real estate projects throughout California in an efficient and effective manner. To schedule a consultation or for further information please contact PB Financial Group at 877.700.3707 or visit www.CalHardMoney.com to learn more.
PB Financial NMLS #357614/DRE #01522495