Hard Money for Purchase Only?

Question

Kerry Boyle · Answer

Has anyone used a HML for the purchase only?

• Yes, this is a thing. I believe that if you are planning to rehab, the lender will want to know what you are doing. This is to protect their collateral (i.e. someone coming in and demoing the property with no experience might not get the purchase financing :) ).

I would rather pay for the rehab with my business lines of credit to save money.

• Have you calculated what it would save? Is your main goal profit/project or ROI? It may be better to use your BLOC to finance more purchases if you have the bandwidth. I love math :)

How would this affect the reserves they want me to have? Thanks in advance! Tyler

• My best guess (every lender is different), is that it would reduce your reserves required. Not all lenders require reserves to be vetted, as @Stephanie Potter said. When lenders check reserves they check down payment, closing costs, and usually a few payments. If your loan is smaller because you aren't getting rehab money, your payment requirement and closing costs would be lower since they are all or mostly calculated by loan amount.

Daniel Molina · Answer

Hi @Tyler McDaniel It seems that everyone on here has given very good advice. I would simply add that it may depend on the rehab budget/scope of work you plan on doing. In FL, I have seem some very high rates and points (12-15 and 3-4 pts) for the more 'creative' the loan. You may need to do some leg work and call around.

I know you should be able to get anywhere around 8.99-9.99 and 2 - 2.50 especially if you are vesting in an entity (@Melvin List curious to see what high rates you are seeing) .Feel free to reach out directly if you want some more guidance.

Bob Green · Answer

Hello Tyler,

Most HMLs will want to see POF for the rehab portion if you want to pay for rehab on your own. Its not very likely they will accept business lines of credit as reserves either because its unsecured credit.

Melvin List · Answer

@Tyler McDaniel you can find better terms on a fix and flip loan.  My experience with Hard Money Lenders they offer high rates and high points.  If you find a Hard money lender that is reasonable with the terms I would love to know.

Stephanie P. · Answer

There are some innovative products out there that will allow for that.  Some don't even care about reserves or credit score.  Not sure if they are very smart products and because they are so new, the lenders can't know how they will perform yet, but to answer your question, yes, there is hard money just for purchase and not renovation.

Stephanie

Hard Money for Purchase Only?

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