100% Rehab Loan FAQ
So how does this whole thing work?
This may be the simplest loan you have ever seen. This loan is ideal for the real estate investor who buys distressed property in Colorado or Minnesota. We want to be on your team to build wealth and rehabilitate neighborhoods. We loan based on the after-repaired value and can loan on properties that do not qualify for conventional financing. This is similar to a construction loan. We advance enough for you to buy the property and pay closing costs and hold the repair money in escrow. We do advance the first draw at closing to help get your project started. You will receive the remaining repair money in draws as the repairs are made.
To get started, we simply get a loan application from you along with signed disclosures and supporting documents (bank statements, proof of income etc). We also need a breakdown of the planned repairs and the purchase contract. We will have an appraiser give us their opinion of the value and we will send loan figures to the title company. Once we have a HUD1 settlement statement from the title company that everyone agrees on we wire in the money and close.
What is residential real estate?
These are business purpose loans on residential real estate. For our purposes, residential real estate is defined as homes for people to live in that consist of buildings with 4 or fewer units. We prefer single family detached units which are houses that are not attached to other houses. We do not loan on anything with more than 4 units or a single family that is attached to other units.
Do you make loans on condos or townhomes?
Yes. We will loan up to 65% of loan to value.
What are the fees?
We charge 4 points plus a processing and underwriting fee of $685. There are other fees to be aware of like your hazard insurance, title insurance, closing fees etc. If you have a deal and want to see an estimate of fees we would be happy to provide this. Generally you should budget for 4 points plus $1,500 to $2,000.
What is the interest rate?
Interest is 15% annual rate with interest only payments due monthly on the first of each month. For example: If you borrow $100,000 your payment is:
$100,000 x 15% = $15,000 (annual) / 12 months = $1,250 (monthly payment)
How do you determine the loan to value?
Loan to value is calculated by taking the loan amount and dividing by the value. For example if you have a loan amount of $105,000 and the appraisal is $150,000 you would have a 70% LTV (Loan to Value)
$105,000 / $150,000 = 70%
An easy way to determine our max loan is to take the ARV and multiply it by70%
$150,000 (ARV) x 70% = $105,000
How do you determine the ARV?
The ARV is determined by an appraiser. A Pine Financial Group approved appraiser is required to do or review the appraisal. We provide the appraiser with the list of repairs that will be done and they base the value on those repairs being done. This is huge because it allows them to pull comparable sales of other recently updated property so we can get a true value of the property.
What are the loan terms?
In most cases we make loans for 9 months. Call for more details on the length of the loan. There are no prepayment penalties or minimum interest due.
How do the repair draws work?
All repair money is set aside for you. It is held in trust by Pine Financial Group, Inc and is released once certain milestones are reached. We are pretty flexible with the repair draws. Our goal is to be sure the property is repaired to a certain standard and that the repairs that were listed during underwriting are the repairs that are made. Because we base our loan on the after repair value it is imperative that repairs are made so we will always hold a repair escrow fund even if you want to pay for the repairs yourself. We do advance the first repair draw at closing.
What if my repairs are more or less than I budgeted for?
If your actual cost of repairs is less than the budget (being under budget) you will receive all repair money once the job is complete. We will not hold extra money that was not used if you come in under budget. We actually encourage you to be under budget by being more conservative with your estimates.
If your repairs are higher than the budget (being over budget) you will be required to make all repairs indicated on the repair estimate submitted during underwriting. This extra money will be your responsibility as we do not increase loan amounts once the deal closes. You will not receive your last repair draw until ALL repairs are made.
Do you pull credit?
Yes. We are able to use your credit report during underwriting but require that we pull our own before we close.
What are reserves and how much do I need to qualify?
Reserves is the amount of cash you have available in case something goes wrong or to help you make your monthly payments. It is always a good idea to have reserves as a real estate investor. No reserves could be your shortcut to bankruptcy.
We require six months of payment reserves in a liquid account. We do not count retirement accounts towards this requirement. Liquid accounts consist of personal or business checking or saving accounts, money markets, brokerage accounts, etc. You must be able to access the money quickly without penalty.
How many loans can I do at one time?
We allow up to two for one person at one time. Once we have done several deals together and we see your work we may allow more than two. This is at Pine Financial Group’s sole discretion.
Can I refinance into a loan with a lower interest rate?
Yes, in fact many of our clients use that strategy. This is a great loan to buy and fix a rental as long as you have a solid refinance ready to go. If your strategy is to refinance it we will require documentation that you are approved for the refinance. To get more information on using hard money to buy rentals check out our FREE special report.
Can you close an assignment transaction or a double close?
Yes. We are familiar with both contract assignments and double closings. If you want to know which title companies we recommend for this type of transaction, simply give us a call or send us an email.
What is my next step to getting started?
We need to get a standard loan application from you. If you have a copy you can fax it in, or you can complete your application online, or just give us a call and we can gather the information over the phone.