Investor · Houston, TX · Member since 2019 · 274 posts · 61 votes
Ok. As a rookie I have a skewed vision of everything. However I have reado enough HML website claims to be utterly confused or enlightened. Which is it?
If a HML will cover up to 80% of the LTV for a property, and I get a deal that is less than 80%- does that mean i can pay closing costs only and get the loan?
If this is true, I'm going 100% into my negotiations and pursuance of off market leads. If it's TRUE, I could start a "bridge loan" and refinance to get that 5k or so back in a few months or so.
If it's not true, then 20% of the loan is still due at closing, plus closing costs. That does make sense. I could still refi and cash out but the deal has to be absolutely smoking and the numbers are much harder to find.
Every HML is different, so I will tell you my criteria. We will lend up to 65% total based on the After Repair Value of the project. If our borrower can purchase and rehab a house within that valuation, they come to the closing with very little cash. They are responsible for costs above the 65% and we will escrow the money for the rehab until they have used their funds first. This is all based off of a scope of work submitted by them.
Every HML is different, so I will tell you my criteria. We will lend up to 65% total based on the After Repair Value of the project. If our borrower can purchase and rehab a house within that valuation, they come to the closing with very little cash. They are responsible for costs above the 65% and we will escrow the money for the rehab until they have used their funds first. This is all based off of a scope of work submitted by them.
@Pete Storseth not 100% sure I follow your question, but if a lender is offering 80% LTV then that means you're responsible for 20% down payment plus closing costs
Ok so it's a battle of acronyms that's causing my confusion. Lenders will typically only lend a percentage of the ARV. Typically that's around 65-70%. So if you buy a property for 100K that needs 50K rehab and will be worth 200K once rehab is complete they would only be willing to lend 140K total between rehab and purchase as a limit if their limit is 70% of ARV.
Regarding LTV/LTC that has to do with how much of purchase price they'll cover. So if they cover 80% LTV/LTC then they'll pay 80K and you're responsible for 20K plus closing costs.