Rehab Financing

Financing, Hard Money Lenders, Private Money
1

I am trying to figure out how to finance a rehab project. I can buy and repair it for 65% of ARV , but I don’t see the benefit of using hard money, because of high points and interest. I keep reading posts about 80% LTV loans being readily available, with good credit and provable income. I am in Oklahoma and have excellent credit (750 last time i checked).

Where would I get one of these loans, mortgage broker, local bank?

I currently have a mortgage on my personal residence, which I will be selling very soon, and I am using a construction loan to build a new home(which I will occupy). I don’t want to get myself in a bind, where I can’t qualify to pay off construcion loan with regular mortgage when I am finished building, but I know I can make a good profit from this rehab.

Any advice would be greatly appreciated?

2

Remember it is not about the money it is about the lifestyle. You use the money to pay
for the lifestyle. You establish your lifestyle and that dictates how much you need from the
real estate to support that lifestyle. Your lifestyle seems to be in flux and adding investment properties
can put you in a pinch. I would either make sure I have enough money from other sources to pay for my
new home or wait until I have a grasp on how much this is costing you before you do a rehab. It is probably
not going to be an issue of credit it is probably going to be an issue of cash. Your wife is not going to be
happy with the old furniture in the new house, you are going to have to get a new car for the new garage, the
kids are going to have to have some new TVs for their new rooms, etc. You are going to extend farther than
just a new house note. Wait for the dust to settle.

3

I make plenty of money from my 9-5 to pay for my lifestyle, that is not what I was questioning.

Sorry I know my original post was vague.

I guess what I was asking was if I get a loan to buy and rehab a home, will this adversely affect my credit when I refi the home that I am building.

Obviously, if I get a new loan for a rehab that goes on my credit report, it will adversly affect it(higher debt to income, etc.)

Am I correct in assuming that a HML will not report to the credit bureaus?

Are the 80% LTV loans that I have heard people refer to from institutional lenders? If so, am i correct in assuming that they will report?

4

The majority of hard money lenders don’t report to the credit bureaus (but is always good to verify that the particular lender does) and the 80 ARV conventional loan does (and you are right, it will effect your DTI).

Regards,

Scott Miller

5

Yep - the 80% loans will report to your credit report. With your credit score you won’t have a problem using a stated income or no ratio loan to qualify if your DTI is a little out of whack.

I usually use 100% conventional loans to buy my props and fund the repairs out of pocket. Then I do a quick refi to pay myself back and lower my LTV because I can use the current market value instead of the lesser of the purchase price/value.