The Real Deal: Why Origination Points Matter when Working With Texas Hard Money Lender

Origination points exist in all sorts of loan transactions, but many people are unfamiliar with what they are or what they mean. In short, when you’re working with Texas hard money lenders, or any other lender, origination points make a difference in how much you’ll have to pay.

One of the things that gets tossed around when people start discussing the terms of their mortgages or loans from Texas hard money lenders is the number of origination points that comes with the loan. In short, origination points are the fees associated with getting the ball rolling to fund the loan. Each origination point is usually worth one-percent of the loan value, and it’s money that you will have to pay for receiving the originators’ services.

Depending on what type of loan you’re getting, and where you’re getting it from, the formula used to calculate the origination points will vary. Some companies consider how much legwork has to be done in order to get your loan approved. If you have one person running credit checks, background checks, scheduling home evaluations and such, that time can seriously add up, and it may manifest itself as origination points.

Other agencies assign origination points based on the risk associated with loaning to an individual. The more-likely someone is to default, the higher the number of points will be. This makes sense from a work standpoint as well, because lenders who routinely help high-risk clients will often run extra checks to mitigate some of their concerns.

How Many Points Should I Expect to Pay Texas Hard Money Lenders?

Texas hard money lenders base their decision to loan money out mostly on the value of the property. In other words, if you’re not looking for much money, and the property has a high value, it’s pretty much a done deal. This means that the number of origination points can be really low, but it generally doesn’t dip below three, no matter who you work with. On the other hand, it’s not uncommon to see as many as six origination points, and some agencies will actually go as high as eight.

You should know how to evaluate offers from Texas hard money lenders, so you know what to expect.

Obviously, no two Texas hard money lenders are going to handle business exactly the same. It’s important to know how many origination points are on the loan, and, for your sake, see fewer of them on the paperwork. However, they aren’t the end-all. You’ll also need to consider your interest rate, and any other fees an agency might add to the total, as well as how easy a company is to do business with. All of these things will make a difference in how much you pay for the service overall, and will have a huge impact in how satisfied you are after the transaction. Moreover, each company may have multiple packages available, so be sure to speak to a professional if you have questions. 

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
dennis@level4funding.com
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

  

About the author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true.

Dennis has been married to his wonderful wife for 38 years. They have 2 beautiful daughters 4 amazing grandchildren. Dennis has been an Arizona resident for the past 32 years.