HML. Help me understand.

I know its prob., a dumb ? but when they say wont lend you more than (60,70,80%) of ARV (after repair value), what exactly do they mean? (using round numbers) if prop., is wrth 100k and I buy for 50k & cost 20k to repair is it a good deal? if so what will my loan amount be? :anon

Your loan would be for $70,000. But you have to consider that there will be around 6% in closing fees. So if you borrow $70,000 (50,000 for the property and 20,000 in a draw for repairs) you will have to come up with 70,000 x .06 = $4,200. You can roll the closing fees into the loan if the deal is sweet enough. Most HML want to stay below 65%.

You want to be careful because if you are using your example and the appraisal comes back at $90,000 instead of 100,000 than your loan will either fall through or you’ll have to come up with money down to make up the difference. The appraisal is a big deal with HML because you’re trying to get it to appraise well above the sale price.

Thanks iron Range. I was just wondering. :embarrassed and those were just round #'s to help me betr understand now let me ask u this if u will is the WORTH another name for FMV (fair market value) or is FMV the actuall appraised value/estimate/comp for that area. Again just guesstimates

FMV is what the property is worth and what it should appraise out at.

ARV is what the property will be worth after it is repaired, which will then equal the FMV. To me ARV = FMV, but someone else more technical might disagree. But you are correct FMV is what it is worth.

FMV and ARV are acronyms of the same meaning…

Future Market Value and After Repair Value that like it spelt out…


Scott Miller

Thanks for clearing that up. Kinda figured it was the same, just wanted to make sure. Im new at all this, but learning extremely fast thanks to you guys I really appreciate it.

Offer= (ARV x 75%) - (Repairs + Holding + Closing cost)