Question About Hard Money Fix and Flip Financing

A Northern California mortgage broker sent an email yesterday morning about hard money fix and flip financing:

Good morning Ted.  I need to know what kind of program you have for real estate acquisition and rehab finance?  Do you fund so-called “flippers”?

Yes, about 75% of our loans right now are for flippers or Owner Occupied 12-month bridge loans for buyers who were turned down for conventional and need financing within a week to close escrow. We typically go up to 80% LTV, but have done a few at 85% LTV when there is significant built-in equity at the time of purchase.

80% LTV Pricing, going off a $500,000 purchase price

  • $400,000 — Loan Amount (80% LTV)
  • 9.75% — Rate for Experienced Flippers (3 verified successful flips)
  • 11.00% — Rate for Inexperienced Flippers
  • 12 Month Term
  • No Prepayment Penalty
  • Closing Costs:  2 Points + $1,295
    (The 9.75% lender will also do 1 Points + $1,295 @ 12.00% for verified experienced flippers. Helpful for experienced property flippers looking to increase their profit margins on flips that will sell within 2-3 months.)

Typically, we close these loans in about a week but have closed several within 2-3 days when the buyer is under an urgent deadline.

Items Needed for Loan Submission

  1. 1003 – Loan Application
  2. Credit Report
  3. 2 Forms of ID
  4. Addresses to prior successful flips (10.50% lender does detailed title searches looking for prior FC or Short Sales)
  5. MLS link to the property
  6. Articles of Incorporation / Articles of Organization + ByLaws / Operating Agreement
  7. Preliminary Title Report
  8. Escrow Contact Information
  9. Realtor Contact Information

When we work with other licensed mortgage brokers who specialize in conventional loans, we like to work directly with the borrower and keep the other broker apprised of the progress with the loan. That way, since we know the ins and outs of hard money fix and flip financing, we are able to expedite the closing of the loan without an additional layer of people working on the file.