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Working With Rehab Investors
By Joel S. Pate
As I speak with mortgage loan originators from around the country, I have discovered that a great number of you have opportunities with rehab investors.
Now that we have outlined the benefits of construction permanent lending to the builder, how a CP loan, whether rehab or new construction is structured, and the "Subject To Appraised Value" nature of most loan programs, let’s discuss the rehab investor.
Rehab loans for investors max LTV is limited by the program guidelines of each specific permanent loan. For example, I know of a loan program for a 640 FICO full doc borrower that allows each investor to have as many as four loans in the construction stage at a time and as many as eight permanent loans at the time that allows for a max LTV of 80% of the "Subject To Appraised Value" of the property after it is rehabbed.
Additionally, other programs, for borrowers with higher FICO scores allow LTV’s as high as 90% on investment property. Loan programs range from full doc with fixed rates, ARM’s, Cash Flow ARM’s, Interest Only Programs, NIV, etc.
Now for you guys that missed the discussion on "Subject To Appraised Value" that term simply means: This house on that lot with these improvements-new roof, new paint, new garage, new kitchen and bath rooms, etc, will be worth X when completed.
Using the following example, let’s determine the loan amount of a typical transaction: Your real estate agent buddy can purchase a fixer upper for $60,000, has a contractor that will do the work to bring the house up to standards for $30,000.00, the closing cost and interim interest will run about $6,000.00 or so, and the home will appraise for $120,000 after completion.
This scenario will allow for the qualified borrower to purchase this home, utilizing a one time close construction permanent loan with the borrower purchasing the property for absolutely no money out of pocket.
Can you sell that? I believe that you can!
If you are interested in entering or expanding your business using this loan approach, feel free to contact me for further training by visiting www.vadiumgroup.com/cpexpert.php
Until next time, study the program guidelines. That is the key. Know what you can do for a customer.
Dedicated to coaching YOU to CP Loan Success!
Joel S. Pate
Joel S. Pate, a dedicated entrepreneur, has spent more than two decades in the building, mortgage, and real estate industries and has been involved in over $100 Million in construction loans and over $1.3 Billion of residential lending. As the CP LOAN EXPERT columnist, Pate provides straightforward, unbiased advice about every aspect of Construction Permanent Lending. This week’s article: "WORKING WITH REHAB INVESTORS" is the fourth installment of Joel’s unique training with simple strategies and tactics designed to teach YOU how to become the CP Loan Expert in your Market. If you ever wanted to unravel the mystery surrounding new construction lending, then you should tune in.
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