Rehab Loan for Home I purchased cash

6 Replies

@Kenneth Liz , HML means Hard Money Lender. There are renovation loans with conventional lenders that will give funds in draws, require a contractor to do the work, and have inspections along the way. You'd apply through a regular lender, and qualify with typical credit scoring methods.

I just got out of a hard money loan, where I paid 2 points, or 2 % of the loan, and 12.5% interest only, on this loan.  It had a short payoff of a year, with a balloon at the ending.  However, the house I bought had several issues that a conventional lender didn’t want to deal with.  We had termites, the house needed to be re-wired, and we had structural issues as we had to add headers and remove a wall.  We got the hard money, and then refinanced the house once it was renovated to a standard that was acceptable to a conventional lender.  We couldn’t have holes in walls or floors, had to have running water, and a few other “safety and security” issues that I can’t recall right now.  

Basically, in terms of the condition of the house that would be acceptable to my lender, we started with the insurance.   My Realtor suggested that we look at obtaining insurance first, and then aim for the mortgage.  Since the house was in rough shape at first, it wasn’t insurable except with a construction type of policy. 

Insurance companies don’t like structural remodels or vacant houses, so be sure to disclose if you are doing a rough remodel.  

 Yes you can use equity in a property for a cash out loan to fix the property or you can get a construction loan on the property based on the after repair value. 

You also have the option of getting a loan to purchase the property with construction costs built in.  (fix and flip loan ) .. As an exit you don't have to sell the property you can still refi once work is complete and rent out the property 

@Kerry Baird ARE THESE NORMAL TERMS FROM A HML (SORRY ABOUT CAPS IT WONT SHUT OFF) Fees that account for your total amount due at closing Down Payment 10%-15% (550 programs require a 20% down) Interest Rate 12% Construction cost 10% Loan Fee 5% 6 months reserve of monthly interest payments Title Fee Insurance Fee We have two programs the 550 and 600. To qualify for the 550 you will need the following; Purchase price has to be at least 50k total loan amount has to be at least 100k. Rehab cost can't exceed the purchase price Credit score at least 550, tax returns not required, all other docs are required. The 600 program Purchase price at least 20k rehab cost at least 10k Credit at least 600 with 3 tradelines and all required docs tax returns are not required All programs require at least 15k liquid asset to be shown in bank account prior to applying.

Fees and interest rates can be all over the place.  The rate and downpayment tend to be higher as you go down in cash available, number of deals done, and credit score.  

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