When you want to buy a home or any property which you wish to resell and rehab, the fix and flip loan can be perfect. This loan is a bit different from the traditional home loans. So, if you want to get this financing, you need to keep certain things in mind. This loan is designed specifically for covering the renovation and purchase cost of the property so that it cannot be sold or renovated. The loan terms differ from one lender to another, but this loan is a very short term. The idea is selling the property before the full due of the loan balance, and then use its proceeds to pay off the loan.
As these loans are the short-term loans, the interest rates are higher than the conventional loans. There is an advantage of using this loan for rehab of any property because you can get the funding from Capital Fund 1 within a few weeks or even days, and you do not have to wait for the loan for two months or so. Many different sources give this loan, and every lender has a different rule. The hard money lenders may finance 65% of the repair value of the home. It does not take long for the approval time, and the need for a credit score is not required also.
What do the lenders look for?
The fix and a flip loan can help you purchase any distressed property, fix up the property, or to sell it for profit. Most of the banks will not lend the funds for repairing and buying these properties because they think the risk will be too significant and so, they do not want to service these kinds of loans. One of the goals of these loans is helping people keep the cash. Before applying for this loan, there are certain things that you need to consider, and these things can improve the possibility of getting your loan approved.
In most cases, the lenders want to finance these loans only up to 65% or 70% of ARV or 85% of the purchase price. It means that you need to invest something between 15% to 35% in cash. Some hard money lenders are there who offer 100% financing though they may charge a high price at a high interest rate. When your credit score is stable, you may get this loan via the bank though this does not happen quite often. The loan terms vary depending on the bank, but if you avail of this route, you may not have to pay a high interest rate.
Before you apply for this loan, it’s always a good idea to research the lenders to find out the one that can meet your needs and requirements in the best possible way. If you search on the internet, you will find many lenders of fix and flip loans such as Capital Fund 1 but finding out the best one is a difficult task, and it takes a lot of time. Do not jump on the very first deal and always reach for an excellent profit, else; you may have to sacrifice a lot of money.