So i might have my first deal but have a question about hard money loans. i know most hmls wont lend more than 65% ltv. does that mean that i have to come up with the other 35%?? For example i have a prop that is worth 100K after repair. The seller is selling for 49K it needs about 7K in repair. Can I get a loan for the 56K and not put any money down? also how is credit come into play? I have horrible credit.
take this advice for what its worth. I’ve never even used hard money yet
From what I understand, yes, you could do that deal no money down. Now, there are also, points up front, closing costs, monthly payments, etc, so you STILL might need money. However, I think you could do that 56K with hard money. If you have good comps that prove your ARV, you should be able to get up to 65%, or 65K (again, minus closing costs, etc.)
*Once again, I’m just spitting out what I’ve read, and have no real world experience with Hard Money to back up my words. *
Most HMLs loan 65%. A few go 70% of ARV.
So, lets see. 65% of 100k=$65k That is the maximum loan amount assuming your ARV is valid (and they will check the ARV with comps and appraisal) If it is valid, you are looking at
49k house purchase
SInce the max loan is 65k and you’re only at 56k YES, they would do that.
Also, SOME lenders will roll your upfront points into the loan so long as the total loan doesn’t go over the max ARV. For example, 4 Points on 56k loan is 2240. That puts the total loan at 58240, still well within the 65k max loan amount.
Additionally, SOME lenders will defer payments (roll them into the loan).
You’re paying interest on both above options but when you need to keep as much cash on hand as possible, this is a nice way to go if you can get that good of a deal… and flip it quickly.
These two options (rolling points/payments) on the loan often depend on your credit and experience in flipping. Additionally, most HMLs want you to have reserves in the bank so you can cover the repair costs (most HMLs make you pay for a portion of repairs upfont and then you are reimbursed through draws from repair funds held in escrow)
EVERYTHING varies from lender to lender. You just have to search the net, call, compare.
I work with a bunch of lenders. He lender is different, and have different guidelines. Usually though they will loan up to 80% CLTV which must include construction money, points, and closing cost. A hard money loan should be based on the property and not on the borrower. So if the deal doesn’t stick its probably because the LTV is not good.
So what’s CLTV? Current LTV? Does that mean 80% of CURRENT value of house?
I’ve never heard of CLTV, but if it’s 80% then I would hope it’s the completed LTV. 80% of the “current” won’t do you much good if you’re trying to do this with minimal cash.
The hard money lenders I know will do 65% to 75% of the ARV. If that ends up being 100% of your cost and your rehab, great. How much of your own cash you have to put in for closing, interest carry, etc., is a function of the lender…there are differences. Some HMLs want you to have, say, $5-10K in liquidity for the first deal. If you get a track record with them, they can get more flexible.