Do banks offer ltv upfront?

[Bab Adetiba]

I bought a buy and hold property for $12,000 (appraised at $25,000) and it needs a $45,000 rehab and I project arv to be $90,000-95,000. I’ve approached a few local banks and they’ve all offered 85% ltc then after 12 months 85% refi. none offer ltv upfront. I recall hearing a podcast where someone suggested this strategy. Also, the banks claim Some banks do but never name them. Have you ever received a loan to value upfront? Why would a bank care how long I’ve owned this property? Thanks

[Bab Adetiba]

My next option is a mortgage broker.

[GR Blanke]

You must be trying to get a conventional loan. Conventional rates are better than hard money; however guidelines require 12 months seasoning for cash out. Our hard money program for rehabbing does not have seasoning. 

[Andrew Johnson]

Bab Adetiba Are you looking for a loan based on your projected ARV? Basically, a loan value based on work that hasn’t been done yet and is greater than the current value of the house? That wouldn’t make any sense...

Additionally, most banks aren’t super stoked for the 30 year fixed for $25K or $12K properties. The loan amount is too low to make it worth their while.

Odds are you should be talking to hard money lenders.

[Bab Adetiba]

@Andrew Johnson Ok thanks for the advice.

[Andrew Postell]

@Bab Adetiba  Yikes, lots of things going on here.  First, there is NOT a 12 month seasoning requirement for Fannie/Freddie loans.  If your bank is stating that then that is because they have an "overlay".  Overlays are rules that banks put on top of Fannie/Freddie loans.  It sounds crazy but this is something that occurs in the banking world.  

Now, this might be confusing quickly because if you purchased this property with cash, and doing the refinance with cash, then you will face some crazy Fannie/Freddie rules.  But if you purchased the property with a hard money loan then you can refinance from day 1.  And you can refinance at the full After Repair Value.

By chance, did you purchase the home with cash or a hard money loan?

Feel free to tag me with any additional questions.

[GR Blanke]

More then likely it is a conventional bank portfolio product. Most of the banks I deal with on their conventional portfolio products have a one year seasoning for a cash out refi. I am speculating this because you are saying after rehab and 12 months they will do a 85% ltv cash out refi on investment. 85% is not Fannie-Freddie investment cash out guidelines. Banks are not in the ARV and risk game. They have to answer to compliance, bank examiners, board members and possible shareholder. If you want to do an ARV loan, private or hard money is your best bet.

[Debra A.]

@Bab Adetiba I am a little confused at the question - what do you mean ltv upfront? Loan to value up front? As in, do they offer you the cash based on the appraised value AFTER the rehab work is done? Yes, you just have to know a mortgage lender that offers products specifically for that situation. An FHA 203(k) is made for exactly that, but they typically don't allow the funds to be used unless it's going to be your PR.