100% financing Program

[Cara Lonsdale]

I just received this new marketing piece that is being distributed for a new loan program.  I thought it would be something that the BP community may find useful as it directly relates to rehabbers.

Has anyone else come across a program like this that will do 100% financing for a rehab project including the rehab expenses?  I thought this was incredible, and I wanted to see if anyone else had experience using a program like this.  I would love to get any feedback from that experience.

100% Rehab Financing that includes Closing Costs!

Fico: 680+ NO EXCEPTIONS! Lender also looks at borrowers debt to income ratio. Loan Terms: 9 months interest only loan, will extend for 4 months for 1 point, sometimes no penalty at all to extend. Loan Size: $60K to $750k, lender can go higher on a case-to-case basis. No min purchase price. Rehab can be more than purchase price. Max LTC/ARV: Lender will fund 100% of the purchase, repairs, and soft costs (lender fee, broker fee and title insurance) on the deal as long as the loan amount does not exceed 70-75% of the After Repair Value of the property, which will be determined by an appraisal. Property/Hazard insurance is not included in the soft costs. ARV is determined on borrower's profile, where property is located & profit on the deal. Interest Rate: Typically 10.5%. Property Types: Only 1-4 unit investment properties! This includes Single Family Homes, 2-units, 3-units, 4-units, condos and town homes. Pre-Payment Penalty: None at all! Use of Funds: Purchase & Rehab, Refinance & Rehab. (In a situation where a borrower purchased a property with cash recently and is looking for rehab financing, Lender can finance the rehab and reimburse them a portion (sometimes all) of their cash that they used to purchase it. This only applies to a recent, cash purchase.) Asset verification: The borrower must have 10% of loan amount, in liquid cash, on hand in order to qualify for this program. Typically that is around $12,000 for most projects. IRA/401k funds will not count. Lender will ask for bank statements to prove this.Cross Collateralization: To qualify for this program and receive 100% financing lender will put a lien against the borrowers primary home. They can take a 2nd or 3rd position lien. If no lien against primary then the lender will not finance the deal 100% and borrower will have to come with down money and closing costs. Points: 5 lender points. Broker can charge up to 2 points. Lending Territory: CO, KS, MO, TX, IN, IL, OH, TN, FL, NY, NJ, VA, MD, PA, NC, & SC. Lender likes to lend in major metro areas in these states. Closing Time Frame: Typically 2-3 weeks.Experience: Prefer borrower to have experience but lender does consider first time rehabbers. Draws: Draws are dispersed to the borrower in $5,000.00 increments, unless otherwise approved, based on inspection progress. Each draw will require an inspection. Inspection fee is rolled into total loan amount. Docs: Tax returns, bank statements, pay stubs, lenders app, schedule of real estate owned, rehab budget. Appraisals: Lender will ask for realtor comps going into the deal; then they do order a full appraisal. Special/Extra: This lender does not do ground up construction! Lender has a $450 doc fee that is also rolled into loan. Borrower will pay interest on the loan amount at that time/what they draw down on. Does not lend to foreign nationals. If an entity has multiple members in it they all need to have 680+ credit, they all need to personally guarantee the loan, but only one lien against one member's personal home has to happen. Lender typically likes borrowers to do one loan at a time with them, but if they have the cash reserves sometimes multiple loans at one time can happen.

[Cara Lonsdale]

Originally posted by @Kay Lee:

Hi Cara, and thank you for posting this share.  :)

Actually, FHA offers a program called a 203K. This program is a standard HUD program while most lenders allow a minimum 620 mid-fico to qualify.

You can finance a major renovation up to 120% of the value as long as the property has a foundation and one wall standing up. It can be entirely out of code, but must comply to a HUD/FHA Counselor visiting to ensure it meets code during each phase of construction.

FHA Reno's (aka renovation loans) do not allow luxury items such as a swimming pool, marble floors, granite countertops, etc.

This program typically allows you to down 3.5% of the sale price, while the cost of rehab (materials, labor, and permits) can be built into the loan.  

If it's a primary residence, the financing can go up to 120% of the value, however if it's an investment, it's limited to 90% of the value.

On the other hand Fannie and Freddie also offer a version of this, that will go up to 90% of the value, but WITH Luxury upgrades like a pool, marble floors, granite countertops, etc, using a minimum 640 mid-fico to qualify.

I would stay away from any company that requires a 680+ fico to do a renovation loan.  It speaks volumes about what kind of overlay's they applied to increase their margins in some way.

Good luck and cheers

Yes, I am aware of the FHA 203K and 203B renovation loans. Neither of those are 100% financing however, which is the title of this thread. Additionally, these are not offered for investors. An FHA loan (renovation or otherwise) is for owner occupied borrowers. Thank you.