All Forum Posts by: Jerry Padilla

@Wei Jie Yang

Draw Information and Process

A maximum of 4 draws are allowed on this program. An initial 10% draw, 2 progress draws which will be based off of progress, and a final draw after receiving a clear final inspection and a title update.

The renovation work is to be completed by the registered contractor only. Please note, no other work can be completed while the scope of work is being done.

Material Draws: We allowed material draws for specialty items only such as flooring, cabinets, countertops, and windows. Only 50% of the vendor's invoice will be paid directly after receiving copies of their W-9, invoice, and a change order signed by both the borrower and the contractor.

If permits are required, the contractor or the borrower is to send copies to the Disbursement Analyst after the loan funds.

Complete draw documents are required to be submitted prior to ordering progress/final inspections. **Additional Final Documents are needed for properties located in the state of Texas. The original Texas Documents must be sent via mail, as the original signed copies are sent to be recorded. This is the state's requirement. Please reach out to the assigned Disbursement Analyst for the draw documents.

All progress inspections, final inspections/1036 form, and title updates are ordered through a 3rd party vendor

Change Orders must be signed by both the borrower and the contractor and sent to the assigned Disbursement Analyst prior to any work starting and for any changes made to the scope of work. The Disbursement Analyst will review and approve the change order. **Please note, the Disbursement Analyst will send the change order to the appraiser for approval, if repairs that could negatively affect the value are requested to be removed.

Wire instructions are required to process disbursements. Funds will be wired within 48 business hours to the contractor's account, once the progress/final (100%) inspections are received.

Additional Draw is allowed at a charged of $110 per progress draw. This fee will be charged to the borrower for any draws over the number allowed, per the product. The contractor is welcome to pay the fee, if he/she commands. It will be deducted from the contractor's disbursement. **Also, the contractor's final disbursement will be deducted, if the borrower does not have sufficient funds in his/her contingency reserve to cover the additional inspection and/or title up-date fees that he/she has incurred during the renovation process. The borrower will be responsible for paying the difference (that was deducted) to the contractor directly.

If the renovation is not completed by the completion date, the borrower and the contractor will need to submit the Extension Request Form. The reason for the delay, their next steps, and an estimated new completion date will need to be stated on the form. **The borrower and the contractor will need to include an additional week to their new estimated completion date to allow time for the final inspection report to be delivered. This form will need to be signed by both parties and sent to the assigned Disbursement Analyst prior the original completion date.

If the project is past the completion date and late fees have incurred, the fees are either to be deducted from the contingency reserve, if there are sufficient funds to cover, the contractor's final payment, if the contractor accepts responsibility, or the borrower can send a check.

Any unused funds will be refunded to the contributing party or applied as a principal reduction, per the Escrow Holdback Approval form.

Contractor Termination: The borrower will need to send an email or a letter to the contractor and copy the assigned Disbursement Analyst and the Loan Officer stating he/she has been terminated, the reason for the termination, and the date their contract was terminated. The Disbursement Analyst will send the borrower the required documents to register a new contractor. The complete documents are to be sent to the Disbursement Analyst for review. After review, the Disbursement Analyst will alert the borrower that the new contractor may proceed with the completion of the renovation work. **Please note, the borrower is responsible with providing the Disbursement Analyst direction on how much, if any, would be paid to the terminated contractor. Final draw documents would be required to pay the final amount.

Permits

Copies of permits must be provided, before any subsequent draws will be disbursed, after initial settlement.

Work not requiring a permit may begin after loan funding

@Ryan Starke

@Wei Jie Yang

@Jake T.

I haven't had any clients use this Freddie Mac program yet, as it is new. 

Here are the down payment requirements for this Freddie Mac program;

• Financing for up to 75% of a home's projected value once completed
• Affordable down payment options as low as 3% for primary residence
• Primary 1 unit – 97% LTV, 2 unit – 85% LTV, 3-4 units – 80% LTV
• Options for primary, secondary and investment properties up to 6 financed properties
• Only allowed on single family residences for second and investment properties
  • Second home – 90% LTV and Investment – 85% LTV

The FHA 203k loan only requires 3.5% down, but it is going to have the high costs of FHA with the upfront and annual mortgage insurance, 3-4 units are still required to meet the self sufficiency rule, if over $35k in renovations you have to have a HUD Consultant.

With any of the programs the county limit is for Both the purchase and borrowed renovations. 

@Edgar Diaz

You will be asked to show 69 days of bank statements to "source your funds" and large deposits will be questioned. For investment properties the only acceptable "borrowed funds" for conventional financing is a HELOC from your primary residence or retirement funds.

@Richard Dinh

If you paid cash you can cash out prior to 6 months with delayed financing but are subject to the purchase price plus closing costs as a ceiling limit.

For a typical cash out, you can start the process prior to 6 months and close right after you hit the 6 month mark. A SFR is an LTV of 75% and a MFR is an LTV of 70%.

@Jake Wakefield

There are portfolio loans that go based on the cash flow of the rental property. They do have loan minimum amounts, and the rates are higher than conventional, but it is better than hard money.

@Harry Harrell

I would be glad to answer any Financing questions that you have.

@Shane Edwards

The BRRR strategy is a great strategy to use! If you are paying cash for the properties than you can cash out refinance prior to 6 months, but you are subject to a max cashout of your initial purchase. You can actually start the process prior to the 6 month mark and cash out at 6 months and a day. SFR investment properties require an LTV of 75% for a cash out refinance.

@Jeffrey Townsend

Delayed financing requires the funds to be sourced and you will not get the gifted funds back. You can pull out up to a max of your initial purchase plus closing costs minus the gifted funds. This is a Fannie Mae guideline and another conventional lender will have to follow this rule. 

After 6 months you can cash out without this limitation. You can start the process prior to 6 months and cash out right afterwards.

@Michael Orlando

That LTV of 80% is for a SFR owner occupied. An investment property SFR is 75% LTV and a MFR is 70% LTV. At least for conventional these are the LTV's. You can consider rate and term refinancing your primary for a lower rate still.

@Craig Clark

You can start the refinance prior to 6 months, you just have to wait until the day after 6 months to close. Let me know if you have questions.