Fix & Flip Loan & New Construction Loan | Qualifying for a Line of Credit
You do not have to be an expert when it comes to the new construction and fix and flip loan programs. Working with a team of real estate professionals will help you with the investor rehab loan. No experienced is required for the fix and flip loans, but comes with limitations.
Terms for the New Construction and Fix and Flip Loan
- Fixed, interest only payments.
- Funding up to 90% of purchase price.
- Funding up to 95% of rehab costs, (95% of cost of new construction).
- Minimum 620 FICO credit score for the investor rehab loan.
- 1-4 units, condos and multifamily up to 20 units.
- Borrower as individual, LLC or corporation.
6 Questions for Pricing and Terms
To generate quotes on the investor rehab loan, it is as easy as contacting a Loan Originator and answering the following questions:
- How many fix and flips have you done in the past 24 months?
- Estimate your credit score?
- How many years of real estate experience do you have?
- What is your net worth?
- How much liquidity do you have?
- Eligible assets, but not limited to: checking account, money market, mutual funds, bonds, certificates of deposit, savings, life insurance cash surrender value, 1031 exchange, stocks, IRA (Roth/Self Directed), 401k, pension plans, annuity, gift funds, and HELOC.
- How many active rentals do you have?
The Two Fix and Flip Loan Programs
The fix and flip and new construction line of credit allows borrowers to obtain multiple loans with their line of credit (one loan per property) during the line of credit availability period.
The single fix and flip loan and new construction loan allows borrowers to purchase a single property, renovate, and sell without experience.
The loan will be secured by properties that borrower expects to fix and flip, refinance, build or a bridge loan that a borrower expects to hold as a rental property. The investor rehab loan is interest only with a fixed rate of interest throughout the term.
Single Fix and Flip Loan
The single fix and flip loan allows borrowers with no experience to purchase property, renovate, and sell. They are designated for less experienced investors and terms improve as you complete projects. Liquidity requirement for this program is 20% and up to a maximum of 35% depending on experience level. There is no net worth requirement and no experience required, but will come with limitations until the first fix and flip loan is completed.
Property types include: single family units, condominiums (including non-warrantable condos), 2-4 units, town homes and planned unit developments (PUD).
Terms and amortization type include 9-12 months, with extensions available, with a fixed rate interest only payment. The minimum loan amount is $50,000 and the maximum is $1,000,000 for an individual loan. The maximum loan-to-value is 70% after repair value and maximum loan-to-cost of 85%.
Fix and Flip Loan Line of Credit
The fix and flip line of credit is a investor rehab loan that allows experienced investors to acquire and renovate multiple properties. They are designed for investors who have completed one fix and flip or new construction loan in the past two years. The liquidity requirement starts at 20% of the line of credit.
Property types include: single family residents, 2-4 units, condominiums (including non-warrantable condos), planned unit developments (PUD), and multifamily 5-20 units.
Terms include 9-18 months depending on the project with an extension available. $50,000 is the minimum loan amount up to $2,500,000 on individual property loan amounts. The line of credit amount depends on the case scenario.
The borrower’s financials and qualifying vary depending on the investor’s profile. The assets minimum net worth is no less than 30% of the line of credit.
New Construction Line of Credit and New Construction Loan
The new construction line of credit and new construction single loan programs are best suited for investors and builders. New construction line of credit up to $10 million for investors or developers to acquire multiple properties, renovate, and sell or refinance off the line. They require one flip or build in the past two years.
Property types include: single family residents, 2-4 units, condominiums (including non-warrantable condos), planned unit developments (PUD), and multifamily 5-20 units.
Land advance requirement allows borrowers to cash out up to 60% on non-permitted property and 75% with permitted property. The maximum after repair loan-to value is 75% and 95% loan-to-costs.
Minimum Net Worth and Liquidity
- 30% of line of credit.
- 20% line of credit and 25% of construction expenses.
New Construction Single Loan
Allows investors to build a single property without a line of credit with no experience required or minimum net worth.
Terms and individual loan amount:
- 9-12 months with extension available.
- Fixed rate with interest-only payment (minimum of 3 month interest).
- $150,000 to $2.5 million per property.
- Max loan-to-value of 70% after repair value.
- Max loan-to-cost of 85%.
Land advance requirements:
- Construction permits cash out amount is 60% without permits and 75% with permits.
- Max loan-to-cost of 85%.
Minimum liquidity:
- Minimum of 20% of purchase price and 25% of construction expenses
Guarantor Residency and Entity Types
- U.S. citizens, permanent and non-permanent resident aliens that reside in the United States allowed.
- On a case-by-case scenario, foreign nationals are allowed as long as they are domiciled in a country that is permitted (required to borrower in the name of the LLC).
- Allow individual, LLC, sole proprietorship, LP, LLP, Series LLC on a case-by-case scenario, C and S corporations.
Eligible Assets for Liquidity Ratios
- 100% consideration – checking account, money market, mutual funds, bonds, certificates of deposit, savings, life insurance cash surrender value, 1031 exchange, and stocks.
- 70% consideration – IRA (Roth/Self Directed), 401k, pension plans, and annuity.
- 50% consideration – gift funds for up to 50% up to $100,000 and home equity line of credit (HELOC).
General Documents Required
To get started on a fix and flip loan, new construction loan, or line of credit, you would need, but not limited to:
- Copy of drivers license.
- Organization documents.
- Articles of Organization/Corporation.
- Operating Agreement/Bylaws.
- Letter of Good Standing from State.
- Purchase agreement.
- Verification of funds, two months bank statements.
- Name and address for your general contractor.
- Eventually we will order title and get insurance together when we have the loan #.
A Loan Originator can put together a list of documentation required during the pre-approval process.
