Fix and Flip Lending

When it comes to funding their subsequent project, real estate investors are spoiled for choice. When choosing between a private money loan and a traditional mortgage loan from a bank, there are a few critical considerations to make.

203K loans and private money loans are a couple good financing options for investors that are interested in fix and flip houses. A 203K loan, which is a conventional mortgage loan package guaranteed by the FHA and targeted for flippers who specialise in building or renovation projects, makes the difference between the two.

A private lender, as opposed to a bank, backs a fix and flip loan with private money. A typical 203K loan has a 30-year term, an average APR of 3.3% to 3.8, and up to 2.5 points may be required to be paid to the lender to pay origination fees.

Typically, investors are expected to put down a minimum of 3.5% of the total cost. However, there are some limitations on the types of renovation projects that can be funded by the money, as well as a financial limit on the amount of the attainable loan.

Investors typically need to contribute more money up front to the project when working with a fix and flip private money lender like Ezra Financial. A private money fix and flip loan will typically finance 85% to 90% of the total project cost, leaving the investor to pay the remaining 10% to 15% up front. While interest rates can change, they typically range from 8% to 12%, with origination fees ranging from 0% to 3%.

Private money loans have relatively short terms and are typically intended for fix and flip projects with well-defined timelines. Private money lenders are far more lenient when it comes to the requirements for loan approval and the underwriting standards when compared to 203K loans. Additionally, they can complete the lending process considerably more quickly than conventional banks can.

The “After Repair Worth”—the projected market value of the property following the conclusion of all scheduled rehabilitation projects—is used to calculate the loan amounts for fix and flip transactions (ARV).

Real estate investors find private money loans to be the best financing option because the property and the project’s viability are given more weight in the approval process than the borrower’s credit score. That is not the case with 203K loans, which normally demand a minimum credit score of 640 and a minimum of $35,000 in improvements.

There is typically no predetermined amount of rehab expenses that must be paid for with private money loans. A private money fix and flip loan allows investors to engage with any licenced contractor of their choice, but a 203K loan requires them to use only those who have been pre-approved by the bank providing the loan.

Furthermore, the fact that a lender like Ezra Financial may frequently close in a couple of days is undoubtedly the most alluring feature of private money loans. Conventional mortgages from banks typically take a minimum of two months to close. Private money loans are an excellent alternative for financing your next project because time is a vital resource in the fiercely competitive real estate investment sector.

A private money loan can be obtained far more quickly and with far less effort than a traditional bank mortgage. First off, because a private money loan only needs a few essential documents, there is a lot less paperwork. You will speak with a loan officer and complete our quick online application after finding the appropriate investment property.

If your deal is approved for funding, the loan officer and underwriter will next walk you through the deal step-by-step and explain the appraisal process. The Ezra Financial team will then create a term sheet that outlines every aspect of the loan so that there are no hidden fees. You will receive your loan and be prepared to begin diversifying your investment portfolio once the loan has completed the closing process.

Getting a hard money loan is an entirely different – and more quick – process than getting a traditional bank mortgage. A hard money loan simply needs a few essential documents, therefore there is a lot less paperwork overall. When you’ve found the appropriate investment property, talk to a loan officer and complete our quick online application.

If your deal is approved for funding, the loan officer and underwriter will next walk you through the deal step-by-step and explain the appraisal process. The Ezra Financial team will then create a term sheet that outlines every aspect of the loan so that there are no hidden fees. You will receive your loan and be prepared to begin diversifying your investment portfolio once the loan has completed the closing process.