The US housing market from time to time can be turbulent and both new and experienced real estate investors need to be able to flexible and move fast. Some of the opportunities with the biggest upside potential require immediate cash deposits and fast closings Still, other houses that have not been renovated in years can turn into gold mines because of their age or condition — but only if you have the capital resources available to you to power through a house-flipping project.
What Is A Fix And Flip Loan?
A house flipping loan is riskier than a conventional mortgage and not typically provided by depository institutions. Most house flipping loans are provided by family offices and private equity. They are in effect “Bridge Loans” to bridge the gap between your purchase and a stablized 30 year loan or sale
Due to the additional risks inherent in flip loans, commercial fix and flip lenders offer specific house-flipping, or “fix and flip,” loans. These loans cover the purchase price and 100% of the rehab cost. Private investors and hard money lenders that provide these loans all have different requirements. CambridgeHomeLoan.com has multiple credit boxes offering from 100% of the purchase and 100% of the rehab so long as the total loan amount is not more than 75 %of the ARV (as renovated value. By leaving the equity in the property at 25% the bank knows that you can always go out and refinance your loan without bringing extra cash to the table since most lenders require 25% down or as equity.
House-flipping loan programs don’t rely on a lot of the documentation associated with a conventional mortgage. Tax returns and employment income are typically not a factor. These loans are available to the first time investor as well as experienced house flipper.
How Are House-Flipping Loans Different From Other Mortgage Loans?
House flipping or Fix and Flip loans are short-term loans, sometimes referred to as Bridge Loans or Hard Money Loans which already sets them apart from bank mortgages. Some of the key differences between of Fix and Flip Home Loans:
- Length or Term of the Mortgage : Conventional mortgage loans have 15-year or 30-year term, fix to flip home loans are short term loans that have different terms based on which lender you use and what their credit box is.. In effect what their investors that purchase their loans want the terms to be. Most conventional mortgages have pre-payment penalties to payoff the loan early or to refinance, Fix and Flip bridge loans do not have a prepayment penalty and the sooner you can finish your renovation and/or refinance the more money you will make.
- Interest rates: Conventional and bank mortgage loans generally have low long term interest rates. Fix and Flip Bridge loans have a higher rate of interest but are almost always interest only. That combined with no prepayment penalty and the ability to close quickly make this product an ideal way to finance fix and flip properties.
- Speed to Close: Conventional lenders and banks have a long system of processing and underwriting before your loan will be approved to close. In todays market that process can take 30 to 45 days or even longer. Fix and Flip loans can be closed in five to seven days in many circumstances.
- Loan Approval: Mortgage lenders consider an investors’ credit scores, income and employment histories, and other factors when deliberating on both approving a loan and establishing the particulars. Fix and Flip, Bridge /House-flipping lenders, focus more on evaluating the property “the asset” and the investor’s ability to quickly improve and sell the property.
What Are The Advantages of A Fix and Flip Loan
Fix and Flip Loans or House-flip loans are designed to be exactly what fix and flip investors need to purchase, rehab and sell or refinance their investment homes. Flip lenders are intended to be in effect a partner to the investor providing a quick quote, expedited due diligence and a fast close. Properties where the sellers are asking for cash buyers can use flip lenders as their cash to close almost as fast as title and insurance can be obtained.
Some other advantages of fix and flip loans are;
- Purchase & Rehab Funds: House-flipping loans include the purchase price of the property and enough of a cash reserve credit for the detailed repairs and related expenses. This is a far more efficient way to finance your investment property than having to take out two separate loans, one for the purchase and an additional loan for the property repairs.
- Speed To Close: The Fix and flip, bridge or hard money loan process can be funded in under a week, especially if investors have their documents in order and can quickly forward them to the lender. Being able to close fast helps investors quickly entice sellers with an offer and fast closing. The seller most certainly would not be able to close on their property as fast with a conventional lender.
- Leverage: Real estate investors who flip multiple properties over the course of a year or at the same time and who may even manage several different types of investment properties rely on their cash liquidity to make repairs, pay property management companies, and more. Even investment home flippers with access to their own funds or credit cards are better served utilizing the banks funds and holding on to their equity for deposits on additional investment properties and unforseen delays or repairs. A fix and flip home loan allows established or profitable house-flipping investors to acquire new property or properties without tying down their own assets.
How to Get the Best House-Flipping Loan for Your Investment Property
The key to obtaining a good fix and flip loan with the best available terms is to work with private investors or hard money lender like CambridgeHomeLoan.com that has started hundreds of investors in the real estate investing business. They will have the knowledge to help you as well as the expertise to allow a fast loan review and expedited closing, and they know that fix and flip investors typically require funds above the purchase price of the property (something that mortgage companies and depository lenders typically do not do).
Fix and flip investors should discuss their properties with us and obtain a fast quote at the some time as placing and offer to go into contract. This way the investor is well aware of the fees, rates and terms and both parties are ready to move forward once an offer is accepted
Hard Money Loans Best Rates and Terms
CambridgeHomeLoan.com specializes in providing the best rates and terms to their investors. With over 11 private equity, hard money and bridge loan lines or credit boxes, we have the perfect loan for just about any fix and flip loan scenario Contact us today to discuss our lending services. Review the application here to see the numbers you will need to know and the due diligence you will need to prepare
Contact us today at 800.826.5077
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CambridgeHomeLoan.com takes an active part in helping our customers achieve their long term goals. Fast closings as fast as 5 days and refinancing into better rates (30 year terms) when it matters. Feel free to contact us with your loan scenario at 800-826-5077.
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