100% financing Program

22 Replies

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.

Sounds interesting, but pretty demanding. I'd like to learn more. Hopefully someone on here has experience in this type of loan. 

Not saying it’s not legit but just be careful. A lot of times if it sounds to good to be true it is. I’d love to hear if anyone has success with this program or if you personally do.

Originally posted by @Matthew Teifke :

Not saying it’s not legit but just be careful. A lot of times if it sounds to good to be true it is. I’d love to hear if anyone has success with this program or if you personally do.

 I know it's legit, as it is in a program deck that I have available to me to offer to rehabbers.  I just wanted to ask for any feedback from people who may have used something like this in the past to hear about how it worked out for them.

Originally posted by @Donald S. :

Sounds interesting, but pretty demanding. I'd like to learn more. Hopefully someone on here has experience in this type of loan. 

 I can see that.  Are you speaking about the cross collateralization piece?  Does the requirement of attaching a personal residence to the deal make it scary for you as an investor?

I'd like to know what else might make it something that people would shy away from, or gravitate to...?

Cara,

I was all in, until the attach personal residence. Documentation, inspections it all is fine, and acceptable.  However the personal residence attachement is too high of stakes for me. Best of luck! Please keep us posted on how it works out?

I don't see this as different from any other Lender who might as well just be saying: We'll loan you all the money you need, so long as you've proved to us that we're taking zero risk!

Anyone who has their own home, and a FICO score above 680, and a "deal" being presented that's worth 143%+ what they'd be paying for it, should have no problem finding sufficient funding; and I daresay, at a lower interest rate than this offering! My 2c...

Originally posted by @Martin Carstens :

Cara,

I was all in, until the attach personal residence. Documentation, inspections it all is fine, and acceptable.  However the personal residence attachement is too high of stakes for me. Best of luck! Please keep us posted on how it works out?

 Right?!  I totally agree.  I think it attaches to much equity just to avoid the down payment.

As a broker, I'm not about to take 2 points up-front on a deal that's already charging 5 points. First of all, that's 7 points up-front and I'm only making 2% on the loan value?

I'd be willing to do that on $350k+ loans, but anything less than that, I need to be compensated for the huge pain in the butt a rehab loan is for me.

I make 1.75% on plain vanilla loans and that's pretty low for most brokers. I definitely seek higher comp on rehab and hard money loans due to their volatile and labor-intensive nature.

The program doesn't appear to be available in GA anyway, just adding my 2 cents.

Wow..5 points plus up to 2 points? plus 1 point to extend the loan from 9 months to 12 months.  Sounds like fees galore.

One of the ways they are protecting themselves is the 70%-75% purchase+rehab loan-to-ARV ratio. May be possible in other markets but hard to find deals with those numbers in California.

Most 100% financing I see is upwards of 14% and 4 pts.  So this isn't much different.  These programs are great for a borrower (but bad for brokers) at the really low price points.  Most lenders have a minimum origination fee anyway; lowest I've seen is $3,000.  With a $60k loan (their minimum), that's 5 points.

As for leveraging the primary residence, put a 100% HELOC on it first, and then put them on top of that. Not much risk there. I know this lender, and they don't care what lien position they have on your residence.

BTW, they also won't lend to out of state investors.  I've asked them this question since I have investments in a few of their lending areas.

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

This post has been removed.

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.

Hi Cara :) - I haven’t used this ever, but I do find interesting topics.  There’s a wealth of opinions and knowledge here.

The 203b is the standard FHA program (non-reno).

The 203k can be used for primary first time investors so long as they reside in the property for 12 months.  They can finance up between 110-120% of the value.  

The investor version of the 203k is limited to 90% of the value.

Although it’s not a true 100%, it’s cheaper because I’m downing 3.5% of the sale price, while the rest of the overhead is built into the loan.  The rate is more favorable as well, and I can ask the loan officer to bump it up for more lender credit to cover any non-recurring and recurring closing costs.  So basically no money at close other then my minimal down payment, with a rate between 4-5%.

I've had my share of "hard money" lenders offering 100% financing provided it's within an 80-90% ARV. However, they all have something in common. They all charge 4-7 points to do the loan, and any other costs associated like processing and title fees is out of the buyers pocket at close. The rates are also 6-10% on a short 1-3 year term.

It’s all based on preference.  While the other lender can offer a speedy close, the cost of the rate is far higher then a conventional loan program, there is 5-7  points of origination you have to pay where in the conventional it’s PAR, and there is no credit at close for any other closing costs associated with the loan where the conventional loan can be adjusted higher for more lender credit to cover the closing costs.

Not programs are not True 100% financing unless down and closing costs are covered by the loan.

Originally posted by @Kay Lee :

Hi Cara :) - I haven’t used this ever, but I do find interesting topics.  There’s a wealth of opinions and knowledge here.

The 203b is the standard FHA program (non-reno).

The 203k can be used for primary first time investors so long as they reside in the property for 12 months.  They can finance up between 110-120% of the value.  

The investor version of the 203k is limited to 90% of the value.

Although it’s not a true 100%, it’s cheaper because I’m downing 3.5% of the sale price, while the rest of the overhead is built into the loan.  The rate is more favorable as well, and I can ask the loan officer to bump it up for more lender credit to cover any non-recurring and recurring closing costs.  So basically no money at close other then my minimal down payment, with a rate between 4-5%.

I've had my share of "hard money" lenders offering 100% financing provided it's within an 80-90% ARV. However, they all have something in common. They all charge 4-7 points to do the loan, and any other costs associated like processing and title fees is out of the buyers pocket at close. The rates are also 6-10% on a short 1-3 year term.

It’s all based on preference.  While the other lender can offer a speedy close, the cost of the rate is far higher then a conventional loan program, there is 5-7  points of origination you have to pay where in the conventional it’s PAR, and there is no credit at close for any other closing costs associated with the loan where the conventional loan can be adjusted higher for more lender credit to cover the closing costs.

Not programs are not True 100% financing unless down and closing costs are covered by the loan.

 Thanks Kay.  Again, I am aware of the program.  We actually used it for my daughter's first home as she was able to wrap the expenses for the rehab into her loan.  It was a great tool.  This is something I would suggest for a house hacker.  Not an investor.

Many of the investors on BP do not intend to occupy. So, this FHA program would not be for them. However, the program listed at the bginning of this thread was a commercial loan available for no-occupying investors.

Cara I think once they tag the owner occ resi dodd frank comes into play and full licensure and NMLS etc etc.. and I know for a fact any kind of loan in TN you need that states license..

this would be interesting from a dodd frank

also if you only have 10% liquidity you should not be flipping homes PERIOD end of discussion. under capitalized and good way to find your primary residence in foreclosure if in fact what they are doing Is dodd frank compliant which I am not convinced it is.. and maybe they are state licensed and NMLS in all those states but some how I wonder. since you don't name the company no way to check on NMLS registry

@Nghi Le   what say you since your now in the lending bizz

Originally posted by @Jay Hinrichs :

Cara I think once they tag the owner occ resi dodd frank comes into play and full licensure and NMLS etc etc.. and I know for a fact any kind of loan in TN you need that states license..

this would be interesting from a dodd frank

also if you only have 10% liquidity you should not be flipping homes PERIOD end of discussion. under capitalized and good way to find your primary residence in foreclosure if in fact what they are doing Is dodd frank compliant which I am not convinced it is.. and maybe they are state licensed and NMLS in all those states but some how I wonder. since you don't name the company no way to check on NMLS registry

@Nghi Le   what say you since your now in the lending bizz

 I just thought it was an interesting way to cross collateralize.  However, it held no interest for me personally.  But there are so many investors on BP that are looking for no money down investing.  So, when I came across this, I thought I would post it for those interested.  Personally, I would never want to tie up my personal residence into my investment portfolio.  It just seems like one of those things that you hold sacred and want to protect.

@Cara Lonsdale   do hard money in Utah does 100%  they charge 3k to join the club and its pretty tough to get through their underwriting and rates are in the 20% apr.. but some on BP said they got funding but most just lost their 3k.

In my mind you need collateral if you have none flipping is not something you should do.

but the collateral can come as a JV with a cash partner.. but someone needs some cash into the deal.. lenders that do 100% and I am one and have been one for years.. but I don't advertise it and only do it with my pet crew.. no way I would do it with someone I don't know or had no money.. I never run credit that does not pay you back.. it shows if they are flakes but a great fico and no money is still a poor poor risk.. if it goes bad they simply don't have the cash you need cash equity other wise the risk is just not worth it and who wants to be in bummer deals.

As a hard money lender, we have offered 100% purchase and renovation to our buyers for years at far better terms than these. I may ask someone to personally guarantee a loan, but for them to ask for a position against the personal home really gets greedy. 

As far as hard money vs. lower rate conventional loans goes, I tell people all the time, if you are aggressive and are looking for a short term loan to flip a property in under 6 months, I firmly believe it's foolish to tie up your personal credit to save a few thousand dollars. I see people that go into 50/50 partnerships to get cash for purchases and they give up far more than if they paid the 12% and 3 points that we charge and kept the deal for themselves. 

But, If you are planning on a longer hold and/or you have less experience, you should consider conventional lenders. The lower rates can hedge against unexpected problems that newer investors may not account for.

I will say that many of the posts I read are reminding me of 2006. People are getting lines of credit against their homes and risking personal credit to throw it down on a bet that Real Estate keeps going up. Meanwhile many buyers are over paying for "deals". I've lived through that story line once and felt the pain of having my entire portfolio controlled by banks. And when they decide to pull your line of credit or stop lending, your business crashes......... learn from the past.

Happy Investing

Derek Dombeck

Originally posted by @Jay Hinrichs :

@Cara Lonsdale  do hard money in Utah does 100%  they charge 3k to join the club and its pretty tough to get through their underwriting and rates are in the 20% apr.. but some on BP said they got funding but most just lost their 3k.

In my mind you need collateral if you have none flipping is not something you should do.

but the collateral can come as a JV with a cash partner.. but someone needs some cash into the deal.. lenders that do 100% and I am one and have been one for years.. but I don't advertise it and only do it with my pet crew.. no way I would do it with someone I don't know or had no money.. I never run credit that does not pay you back.. it shows if they are flakes but a great fico and no money is still a poor poor risk.. if it goes bad they simply don't have the cash you need cash equity other wise the risk is just not worth it and who wants to be in bummer deals.

 I totally agree.  If you don't have the cash to invest, you shouldn't be in the game....at least not the flipping game.  It would be time to find a new strategy for raising capital.

Hard to qualify and expensive. Did you try that lender? Legit?

Originally posted by @Account Closed :

Hard to qualify and expensive. Did you try that lender? Legit?

 No.  I wasn't interested in the product, but I had been reading a bunch of BP posts who were looking for 100% financing.  Many believe that 100% financing is dead after the crash, but when I found this, I thought I would post details for anyone interested.  It requires too much from the investor in my opinion.  That is why I wasn't interested.

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