FREQUENTLY ASKED QUESTIONS
Is there a pre-payment penalty?
No, there is no pre-payment penalty on most loans.
What is the average interest rate?
The rate can vary due to credit history, rehab/new construction experience, or the property being lent on itself. Short term Bridge Loan Money (conventional or hard money) is 7-12 %. Rental from 5 to 8.5 %.
What is the loan term?
Most rehab and sfh new construction loan terms are 6 to 18 months, but we also offer other lengths depending on your project timeline. For rental loans the terms range from a 30 yr. fixed to a 3-7 year fixed product.
What is the maximum loan-to-value offered?
We offer loans up to 75% of the after-repair-value (ARV) and 90% loan to cost (LTC) of the home.
What are the closing costs?
Average one to three points. Out of pocket fees are for the appraisal and right before the loan funds, for builders insurance. Then you have the standard title, processing, survey, etc. fees that are associated with closing a loan. Most of these fees can also be rolled into the loan.
How long does it take to fund?
Once we have a 100% Full File (refer to Application Checklist), approval and closing takes 4 to 5 days for Stated Purchase Money and 2 to 3 weeks for Full Doc Loans (Please do not piecemeal loan documents but rather prepare the five loan documents Online Application).
Once you are approved and in the system, we can close and fund you in 48 hours for Stated Rehab and 4-5 days for Full Doc Hard Money. This is from the time the property is inspected and we make sure the title is clean.
What is the minimum credit score?
The minimum score varies by program, but in general, we offer programs for individuals with a 600 fico score or above. IMPORTANT NOTE – to refinance out through Fannie Mae you must have a minimum 550 fico score and be approved through Fannie Mea to refinance out non-owner. The max LTV for a rate term refinance are 75% LTV for SFH and for 2 units and 70% for 3-4 units. Please provide an approval letter through your local bank or credit union as this will help you to exit the short term rehab money.
Do you have banks / brokers you can refer us to for exit strategy refinance out?
Yes, we are part of a lending network and can provide you banks and brokers that can help you refinance out.
Do you provide comps or appraisals?
No, we are not appraisers and do not provide for sale or sold comps for our clients. This is where your money is made and is 100% the responsibility of the investor to do his / her own due diligence on value. IMPORTANT NOTE – sold comparables within 6 months and at the max a ½ mile radius are how Fannie Mae determines value and LTV for your refinance out. Having a strong appraiser and realtor on your team in the distressed property acquisition market is a key to success.
What company do you recommend we use to research foreclosed properties?
Our partner company, ReatlyTrac.com, is the #1 leading authority in the foreclosure marketplace to conduct your search and due diligence on bank-owned REO’s and auction properties. RealtyTrac provides detail property, loan, and home sales data while also providing cutting edge innovative technology solutions. The user friendly educational resources RealtyTrac provides facilitates the buying, selling, and investing in Real Estate.
What do I need to qualify for a Full Doc rehab loan?
Most all rehab and new construction loans are based on your experience vs. tax return income with private capital.
For the 100 % purchase and rehab loans in some states we need good clean credit with an active history of established trade lines. No bankruptcies, foreclosures, or tax liens. Clients must have the last 2 yrs of full tax returns and or W2’s. We like to see $25,000 – $30,000 cash source and seasoned for every $100,000 borrowed. Other strong compensating factors that can be used to qualify are IRA’s and Stocks.
Client must have a low debt-to-income ratio (not a lot of debt vs. the amount of money they make per year) or for 100% bankable finance programs to qualify. We like to see the debt ratio at 45-55% or below with your rehab loan payment figured in, in order to qualify for our private money programs.
How the debt-to-income ratio is figured is to take your mortgage payment (taxes an insurance included) and all your minimum payments on all credit cards, and car payments per month. Add these up. Then take what you make per year W2 or on Tax Returns and divide by 12 months. Take your monthly payments and divide it from what you make monthly = your debt ratio.
$1200 mortgage payment
$400 taxes and insurance
$450 car payment
$200 credit card
$150 credit card
$80 credit card
$150,000 rehab loan at 9.5% interest only = $1187 / month
$4267 monthly debt
Client makes $80,000 per year OR
$6666 per month
$4267 divided by $6666 = makes the debt ratio 64%. This investor most likely will need a partner that makes money to qualify for 100% rehab money. *Investor can qualify for most other lending products with a high debt ratio.
Do I have to make a monthly payment during the rehab construction phase?
Most often you do have to make an interest only payment every 30 days while the rehab is being done. We do have programs where you can roll 6 months worth of interest only payments into the loan
Can I close under a LLC, C, or S corp.?
In most instances yes.
If I bought the property cash, can I refinance the property for the rehab money to complete?
In most instances yes.
Can you help us sell our property when the rehab is done?
Yes, we can help you sell your rehabbed property and host it on a partner company website for sale in the Chicago area. Give us your bottom line and the spread sheet on your property with recent closed sales in your property’s area to determine its true value.