Don’t let lender fees catch you off guard. Know exactly what fees will be due before underwriting takes place and at closing.
Some of the fees incurred are upfront fees which are due prior to the lender commencing underwriting. The initial deposit can range from $500 – $25,000 depending on the loan size, lender, and program. These fees normally include out of pocket expenses that the lender will incur for legal, appraisal, underwriting, and due diligence for processing the loan request.
It is always wise to request a detailed breakdown of the costs for the initial deposit. Be wary of lenders that require a substantial upfront fee, but can’t justify each portion of the fee.
Lenders usually request a copy of your credit report to review your credit history and ultimately determine if they should risk lending you money. This fee goes to the credit reporting agencies and will cost around $15 – $30 per borrower on the loan.
Since the commercial appraisal process requires a certain level of knowledge and experience with a particular type of property and market area, lenders will typically only accept appraisals from one of their tested and approved partners. Commercial appraisals take between 2 and 3 weeks to complete and cost about $2,000 to $3,000.
The lender will pull a report on the subject property to make sure there are no environmental concerns that need to be addressed and the cost of the report is approximately $200. However, if any problems are discovered, there could be a need to conduct a Phase 1 Environmental Site Assessment (ESA), which could cost an additional $1,500 to $2,000. If a Phase 2 ESA is required costs could potentially be in excess of $10,000.
Building Inspection Report
This is usually paid before closing as well. This can cost between $500 and $5,000, depending on the state and property size.
Buyer’s Attorney Fee (Not required in all states)
This fee is paid to the attorney who prepares and reviews all of the closing documents on your behalf.
The other expenses involved in the financing of a commercial transaction are closing costs. These are due at the time of funding of the loan and can be included in the financing. These costs are usually the origination fee, property insurance, title insurance and title related expenses, property insurance, and escrows for property taxes.
Lenders may charge a fee for originating the loan. Origination fees are usually a percentage of the total loan. For example, if the origination fee was 1% of a $200,000 loan, the fee total would be $2,000.
Commercial Property Insurance
This cost protects you and the lender if there is ever any damage to your property. The cost range from state to state and depends on the value of the property.
Legal Fee for Lender
Lenders can require the borrower to cover reasonable legal fees and costs needed by the lender in order to complete funding. This fee amount ranges depending on loan size and details of the loan and/or property.
This fee is charged by lenders for preparing the loan and all of the associated paperwork. This fee amount depends on the size of the loan, type of loan, and lender’s program.
This fee is associated with loan policy, loan endorsements, and settlement fees. This generally protects the lender from liability with inadequately performed lien or title searches.
Broker fees can be a percentage of the transaction, a flat fee, or a combination of both. If you decide to work directly with a lender, like Commercial Direct, then this fee would not apply to your overall costs.
This fee is paid to your lender for conducting the closing. This fee ranges depending on state and the lender type.
Paying These Costs
At Commercial Direct, we outline all fees at the pre-approval stage to make sure you’re never surprised. Calculate your deal with out Mortgage Payment Calculator to find which Commercial Direct program and options will work best for you.