Mar
16
Now that the dust has settled a bit, I’m in the processing of posting some details and numbers from the transaction so far. One of my major goals with this site is to provide as much detail as possible into each deal I do, as that was something that I’d have appreciated myself when doing research before buying this first flip property. What few sites there are out there devoted to flipping (from a hands-on perspective of the person actually doing it) tend to be short on the nitty-gritty details, but that’s exactly what people looking to get into flipping are after.
So here are the mortgage details and fees for this first flip property. (As far as a bit of general background info, my wife and I jointly applied for the mortgage, we’ve both got credit scores of +800, zero personal/consumer debt, and about 1x our combined annual salaries in savings and liquid assets, and we did a full-doc loan.)
Total loan amount: $60,000
Loan type: Conventional 30 year fixed mortgage, 100% financing
Interest rate: 10.25%
Down payment: $0
Monthly mortgage payment (mortgage/insurance/taxes): $690.33, with first payment due on May 1, 2007
Mortgage application fee: $399
UW review: $300
Administration fee: $300
Committment fee: $300
Processing fee: $300
Additional appraisal fee: $125
Document fee: $125
Closing fee: $200
Delivery fee: $60
Title insurance: $178.55
Escrow fee: $150
Total mortgage/title fees: $2,437.55
Looking back on the two other loans we’ve received to purchase homes, none of the fees look too gaudy, especially for a 100% financed loan for an investment property. The interest rate on the loan is obviously a bit high, but given that it’s a flip property that’s sort of a moot point.
I was pretty happy with the loan, all in all. It’s kind of eye-opening to really sit down and look at all the assorted fees, especially through the lens of a short-term property that I plan on flipping. When applying for loans in the past for our principal residences it was much easier to shrug off the mortgage fees as simply the cost of doing business, which we’d hopefully recoup through property appreciation, etc., but they hit home much more directly for the flip property, as they definitely eat into any potential profit I might pull out of the place.
I didn’t really have much choice for this first one, as I wasn’t willing to drain our reserves to the point that paying cash would have, but it’s definitely something to keep in mind moving forward, especially if I can build up some profits from flipping and the sale of the Austin house. While I still may end up financing some more properties, there’s a lot to be said for getting into pay-cash-mode as soon as possible, even if it takes me a bit outside of my comfort zone.
Comments
3 Comments so far
Love the details. Thanks!
Few questions…
Did you provide full-doc when you applied for the loan?
What was the cost for title insurance?
Wow. 10.25%, huh? Seems a little insane given your credit score and debt/income ratio. I know you don’t plan to pay the mortgage there very long, but every little bit helps. Plus, lower rates give you more options in those exit strategies that you mentioned later on. Other than that, as I read I continue to be amazed by our similarities (same age, 1 rental each, and first flip in progress; to name the 3 most obvious). But you’ve got me beat by a mile in the do-it-yourself department (I’m contracting out). In any event, best of luck. I’ll continue to stay tuned.
Oh, and congrats on the zero personal/consumer debt. If you’re like me, you just shrug at such a statement since not having debt is essentially a way of life for you. But be reminded that it’s still something to be appreciated and commended. We’ve still got some student loans to wrangle with, but we’re getting there.
Well, the other side of the 10.25% rate was that the loan was for 100% financing on an investment property, which isn’t always easy to pull off.
But yeah, every little bit does help. Assuming everything goes reasonably well with the flip and the sale of our rental property, I’m really hoping to pay cash for the next property, as it’d make life much, much easier (although a bit scarier, as far as depleting savings, etc.)