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If you’re a house flipper already approved for a hard money first mortgage and need a second mortgage to cover down payment and closing costs, chances are you’re talking about something called gap funding. This blog post will discuss what you need to know about gap funding, including:
This question has come in through the website dozens of the times over the years from prospective house flippers who are short on funds to close their transaction. What they’re asking for is something called “Gap Funding,” which is a hard money second mortgage that “fills the gap” when not having funds for down payment and closing costs.
Yes, First Capital Trust Deeds originates hard money loans for properties listed by online real estate companies like Auction.com and Hubzu.com.
Over the years, First Capital Trust Deeds has received this question, “How much down payment is required to flip a house with a hard money loan?” This blog post answers that question for the first-time house flipper and the experienced house flipper who has done 10+ projects.
Some private lenders use a method of interest accrual known as “Dutch interest” for a hard money construction loan which calculates payments based upon the entire loan amount rather than payments on partial advancements in a construction loan.
First Capital Trust Deeds works with a few hard money lenders in California, Oregon, Washington, and Florida that use Dutch interest. Most construction focused loans originated by FCTD, however, feature “New York interest”, where interest accrues on construction reimbursement advances rather than on the entire loan.
If you’re eyeballing a prospective investment property to rehab and you need to finance it quickly, you might want to consider a fix and flip loan. As an investment financing option that’s best secured through a broker, this type of loan is excellent if you’re keen to revamp your property portfolio.
A hard money construction completion loan seems pretty easy and straightforward at 65-75% of as-is value of a partially finished home. And typically they are easy to get approved when it comes to the lender’s underwriting. Builders and house flippers, along with hard money lenders, often run into challenges from the title company’s issuance of a 2006 Alta Extended Lender’s Policy with 125% coverage.
Every week or so, we receive a phone call or email inquiry from a prospective house flipper inquiring about our After Repaired Value (ARV) hard money fix and flip financing programs. And I have to admit that as soon as I hear someone talking about an ARV loan, my ears perk up because I know that it’s going to be hard to get the person off their insistence on an ARV-based loan.
Each week it seems that I talk to an aspiring first-time house flipper who is interested in taking out a hard money loan to finance their very first acquisition. Most of the time, I’m the first or second mortgage lender they’ve spoken to about hard money fix and flip financing. Prior to our conversation, their only exposure to hard money financing was through the real estate coaching program that they’ve been enrolled in over the past few months, online forums, or a conventional mortgage broker. And judging by the questions I’ve been asked, it seems that the coaching programs aren’t doing a very good job of conveying the hard truth about hard money loans.
As acquisition prices for fixer upper properties continue to rise due to increased competition in local markets, First Capital Trust Deeds has lowered the upfront costs on private money fix and flip loans by offering experienced house flippers two pricing options at 1 or 2 points.
