| Investor Rehab Loan Program | | | | a statistical means to determine the future |
| There are many programs for commercial and | | | | repayment of the loan. Again the lender wants their |
| residential real estate investors to purchase and | | | | money back not to own the property. Many Rehab |
| rehab income producing real estate with low or no | | | | loans require a minimum credit score of 680 today. |
| down payment. These are generally called hard | | | | Character |
| money loans made by private investment funds. If | | | | In tradition conventional mortgage programs the |
| you want to buy property for investment purposes | | | | character represents the subjective elements of a |
| there may be a program for you. These are general | | | | credit profile to that help an underwriter make a |
| guidelines to help you determine if you qualify for a | | | | decision not just on hard facts. For Investor Rehab |
| hard money loan. In these are the criteria that private | | | | Loans that would include experience as an investor |
| lenders look for to lend to REI's (Real Estate | | | | and rehabber. Some private lenders are even running |
| Investors). | | | | criminal background checks to avoid potential fraud |
| - Collateral - The property type and property value. | | | | and other issues. |
| - Capacity - The borrowers ability to make loan | | | | Assets |
| payments. | | | | When a file is underwritten for its full merits, a |
| - Credit - The history of how the borrower has paid | | | | borrower who has a lower credit score and |
| their bills. | | | | substantial assets is as safe or safer than one with |
| - Character - The experience as a investor and | | | | limited assets. This includes down payment and |
| rehabber. | | | | reserves for emergencies and to even pay off a loan |
| - Assets - cash reserves in case the cost of the | | | | if necessary. |
| renovation are higher or other contingencies. | | | | Exit Strategy |
| - Exit Strategy - How will the investor repay the loan | | | | Now the most important part of the deal. If the |
| on the property. | | | | borrower has a property with lots of equity and |
| Collateral | | | | good credit, income and assets chances are good |
| The property type and current plus the after rehab | | | | they can refinance the property with a conventional |
| value are the most important factor in if a private | | | | lender to pay the high interest short term rehab loan |
| lender would make a hard money loan. But, in this | | | | off. This is the most important aspect of investor |
| market with an unlimited flood of REO and distressed | | | | rehab lending, will the get their money back quickly. |
| property, no lender wants to own properties. Private | | | | Therefore, some private funds will make loans to |
| lenders want to make quick short term loans that | | | | borrowers with credit scores as low as 600 if they |
| have good security and that they are reasonably | | | | have a viable exit strategy and assets to cover |
| assured they will quickly get there money back. | | | | contingencies. |
| Capacity | | | | Rehab Lending Today |
| Most funds require interest only payments for the | | | | In the past the property was almost the only criteria |
| term of the loan. The lender needs to know if the | | | | to get a hard money rehab loan. Today the bridge |
| borrower has the means to make those payments. | | | | funds are looking at a complete file and underwriting |
| Unlike hard money loans in the past less emphasis is | | | | the deals with exit strategy as the first priority. Gone |
| on the property and more is placed on the | | | | are the days were credit and assets did not matter. |
| borrowers ability to repay the loan. | | | | The borrow must qualify for a refinance or have a |
| Credit | | | | solid verifiable way to pay off the loan by the end of |
| To that end credit has become more important. The | | | | the term. When that is the case it is a win win for |
| credit profile shows the history of repaying debt and | | | | everyone, even the economy in general. |
| the capacity to handle new debt. The credit score is | | | | |