All Forum Posts by: Hyeseong Park

Quote from @Dallas Sauer:

Quote from @Scott E.:

Quote from @Hyeseong Park:

Quote from @Erik Estrada:

Yes the broker is right. The rehab funds are held in an escrow account and you may request draws once the work is completed and inspected. You could request it all at once if you choose to set it up that way. 

I have a few clients that pay their workers once they finish a section of the project, however they are licensed GCs. 

Thanks for letting me know! So whenever investors flip their house, they most likely need down payment for houses + rehab price in their pockets, correct? No any lenders provide rehab price upfront?

You will need to have some "float" money in your account to cover paying your general contractor or paying for materials while you wait for draws to be reimbursed.

Once you get really experienced you can get into a groove where the GC does the work, asks for $, then you ask your lender, then as soon as your lender funds you can pay your GC. That's how most of my draws work nowadays. But this is much easier said than done.

 This is the correct answer. typically you would work out a schedule with your contractor. Say 5k up front or whatever is necessary. Then once work is completed, you can take your first draw to reimburse that 5k. rinse and repeat until the project is completed. 

Oh I see. I thought I'm gonna only get one time for rehab cost from lender, which is at the end when the rehab is done but I guess it is not true. So if we between I and contractor make each section (ex. Kitchen part, bathroom part) that we plan done, the lender will send me multiple times for each section to cover up?

Quote from @Erik Estrada:

Yes the broker is right. The rehab funds are held in an escrow account and you may request draws once the work is completed and inspected. You could request it all at once if you choose to set it up that way. 

I have a few clients that pay their workers once they finish a section of the project, however they are licensed GCs. 

Thanks for letting me know! So whenever investors flip their house, they most likely need down payment for houses + rehab price in their pockets, correct? No any lenders provide rehab price upfront?

I have done 2 flips with my cash only so far and I'm trying to finally go with fix and flip loans to buy multiple houses. Usually these fix and flip lenders do ARC up to 85%~90% & rehab 100%, so I know I have to pay some downpayment for purchasing houses. 

But I recently reached out to one broker and he said once I purchase house with borrowing money, I still have to pay for whole rehab amount at the beginning to handyman and when everything is done, I get money from the lender for whole rehab payment. Is this normal?

Or I dont know if this paying whole rehab price from my pocket first and get paid from lender at last is depending on lenders. 

And if not so, is there any way that I can get paid from lenders for rehab payment at the same time as what I get for purchasing houses?

I have done 2 flips with my cash only so far and I'm trying to finally go with fix and flip loans to buy multiple houses. Usually these fix and flip lenders do ARC up to 85%~90% & rehab 100%, so I know I have to pay some downpayment for purchasing houses. 

But I recently reached out to one broker and he said once I purchase house with borrowing money, I still have to pay for whole rehab amount at the beginning to handyman and when everything is done, I get money from the lender for whole rehab payment. Is this normal?

Or I dont know if this paying whole rehab price from my pocket first and get paid from lender at last is depending on lenders. 

And if not so, is there any way that I can get paid from lenders for rehab payment at the same time as what I get for purchasing houses?

Quote from @Andrew Postell:

@Hyeseong Park ok, give me the basics here of the transaction - what's the ARV of the property? How much do you owe on it currently? If you do have a mortgage, is it a hard money loan?

 I will DM you on this.

Quote from @Logan Padilla:

Quote from @Hyeseong Park:

Quote from @Logan Padilla:

Quote from @Hyeseong Park:

Quote from @Logan Padilla:

Quote from @Andrew Postell:

@Hyeseong Park yes, the closing costs are usually rolled in....but those are still costs. It's not "free" to refinance. So, if I save $25 per month on my payment...and it costs me $10,000 to refinance...then it would take me 400 months just to break even. And a 30 year loan is only 360 months. Keep in mind that lenders will try to "sell" you lots of things...always look at the true costs of what those things are. You do have to show bank statements to satisfy the reserve requirement for any DSCR loan...your lender should be able to tell you how much you need in "reserve" funds before you commit to them.

Hope all of that makes sense.

Just to clarify, this may be the case with Guaranteed Rate, but bank statements are absolutely not necessary if you have funds in other accounts.

Also, I'm not sure what the line "lenders will try to 'sell' you lots of things" means. There isn't really much to sell. We should play much more of an advisory role rather than that of a salesperson. Lastly, every lender should be going over all fees associated with a new loan. No one likes surprises at the closing table.

 What if I don't have any other assets? I heard that they usually go with 6 months reserve if I don't have any other assets to show besides my bank statement. What does 6-month reserve exactly mean? Do they take out 6-months of PI amount from the amount that I'm going to borrow? 

6 months of reserves means you need to have 6 months worth of payments (principal, interest, taxes, insurance + mortgage insurance and HOA, if applicable) in your account after closing. If you're doing a cashout refinance, you can use the cashout amount towards your reserve requirement.

Is there a specific reason you don't want to use bank statements for assets? I'm also happy to discuss this with you offline, if you would like?

Thanks for letting me know. And I see. Now I understand what 6month reserve. So I can't use the 6 months amount from my cashout I guess? You can reach out via DM and answer this. And the reason why I cannot use bank statement is that I don't have enough in my bank acc simply but have the house for DSCR loan.

If you’re doing a cash out refinance, you CAN use the cash out funds towards your reserve requirement. 

 I just "can" use the cash out funds towards your reserve requirement or I "have to"? 

Quote from @Andrew Postell:

@Hyeseong Park do you have a property that you are trying to refinance right now?

Yes and that's the only one investment property for DSCR.

Quote from @Logan Padilla:

Quote from @Hyeseong Park:

Quote from @Logan Padilla:

Quote from @Andrew Postell:

@Hyeseong Park yes, the closing costs are usually rolled in....but those are still costs. It's not "free" to refinance. So, if I save $25 per month on my payment...and it costs me $10,000 to refinance...then it would take me 400 months just to break even. And a 30 year loan is only 360 months. Keep in mind that lenders will try to "sell" you lots of things...always look at the true costs of what those things are. You do have to show bank statements to satisfy the reserve requirement for any DSCR loan...your lender should be able to tell you how much you need in "reserve" funds before you commit to them.

Hope all of that makes sense.

Just to clarify, this may be the case with Guaranteed Rate, but bank statements are absolutely not necessary if you have funds in other accounts.

Also, I'm not sure what the line "lenders will try to 'sell' you lots of things" means. There isn't really much to sell. We should play much more of an advisory role rather than that of a salesperson. Lastly, every lender should be going over all fees associated with a new loan. No one likes surprises at the closing table.

 What if I don't have any other assets? I heard that they usually go with 6 months reserve if I don't have any other assets to show besides my bank statement. What does 6-month reserve exactly mean? Do they take out 6-months of PI amount from the amount that I'm going to borrow? 

6 months of reserves means you need to have 6 months worth of payments (principal, interest, taxes, insurance + mortgage insurance and HOA, if applicable) in your account after closing. If you're doing a cashout refinance, you can use the cashout amount towards your reserve requirement.

Is there a specific reason you don't want to use bank statements for assets? I'm also happy to discuss this with you offline, if you would like?

Thanks for letting me know. And I see. Now I understand what 6month reserve. So I can't use the 6 months amount from my cashout I guess? You can reach out via DM and answer this. And the reason why I cannot use bank statement is that I don't have enough in my bank acc simply but have the house for DSCR loan.

Quote from @Logan Padilla:

Quote from @Andrew Postell:

@Hyeseong Park yes, the closing costs are usually rolled in....but those are still costs. It's not "free" to refinance. So, if I save $25 per month on my payment...and it costs me $10,000 to refinance...then it would take me 400 months just to break even. And a 30 year loan is only 360 months. Keep in mind that lenders will try to "sell" you lots of things...always look at the true costs of what those things are. You do have to show bank statements to satisfy the reserve requirement for any DSCR loan...your lender should be able to tell you how much you need in "reserve" funds before you commit to them.

Hope all of that makes sense.

Just to clarify, this may be the case with Guaranteed Rate, but bank statements are absolutely not necessary if you have funds in other accounts.

Also, I'm not sure what the line "lenders will try to 'sell' you lots of things" means. There isn't really much to sell. We should play much more of an advisory role rather than that of a salesperson. Lastly, every lender should be going over all fees associated with a new loan. No one likes surprises at the closing table.

 What if I don't have any other assets? I heard that they usually go with 6 months reserve if I don't have any other assets to show besides my bank statement. What does 6-month reserve exactly mean? Do they take out 6-months of PI amount from the amount that I'm going to borrow? 

If anyone knows, it would be great to know some lenders who don't require it as my house is free and clear! (no debt in it) I found some lenders do this so hope you don't say "Most lenders will go with bank statements". (I know it :))