- What is loan to value?
- The Loan to Value (LTV) is the percentage of the home’s value a lender is willing to lend. For most loan types, the LTV a lender will lend is less than 100%. Hard money loans are riskier loans because they must close quickly, require less documentation and usually are on properties that need repairs. Because of these factors, hard money loan LTVs are usually between 60-75% depending on the lender and product.
- What is after repairs value?
- After repairs value (ARV) is the projected value of the property after a defined list of repairs are completed. Hard Money loans utilize “Subject to Repairs” appraisals. A borrower will provide a detailed list of repairs or improvements to be made and the cost of those improvements. The appraiser will complete an appraisal comparing the subject property to other properties which will be similar after all repairs are completed.
What is the difference between hard money loans and traditional bank loans?
With most traditional bank lenders, the process is slow, requirements are many and it is almost impossible to buy distressed properties. Catalyst understands the needs of real estate investors and distressed sellers. We can close quickly, in 7-10 days, or less in certain circumstances. We also only require the minimum documentation to protect our interests to make the process as easy as possible for all involved.
- What is the process for repairs with a hard money loan?
- As a borrower, you will provide a detailed list of repairs and the cost for those repairs. The accuracy and comprehensiveness of this repair budget is essential. At closing, the funds for repairs will be held in escrow. Most contractors will expect you to pay to kick off the job – often between 20-25% of the total budget. You can ask for as many draws as you would like. We encourage you to take several draws since we will provide a second set of eyes to review the quality of work. Each draw inspection requires a $175 fee, but these draw inspections routinely save customers thousands by not paying for incomplete or low-quality work. Funds can be drawn for completed work.
- What are your loan terms?
- Our loans are usually 6-month terms that can be extended. There are extension fees at each extension.
- Do you have any fees that I must pay before closing?
- Catalyst does not charge any application or other fees. We do require an appraisal and the borrower pays the appraisal fee before we order it. That fee is usually $450.
- How much cash do I need to close?
- Cash to close depends on the details of your deal. Typically we will lend 70-75% of the ARV. Any amount of money needed to purchase and rehab the property above our loan amount will need to be brought to the table to close plus closing costs. However, if you find a great deal at a really low loan-to-value we can usually finance the whole deal and roll in some closing costs based on the details of the deal. If you want an estimate it is best to call our office and ask for a loan officer.
- Can I get 100% financing?
- Yes. If you acquire the property at a low enough price and meet certain requirements, you could get 100% financing. Catalyst will roll in the cost of the purchase and closing costs if the loan is below our required LTV.
- Can you help me make sure the deal is a good deal?
- Each person must do their own due diligence. With that said, if you are pre-approved, Catalyst can provide additional guidance on the after repairs value and the repair budget. That is one of the advantages of working with our experienced team of lending professionals.
- Do you lend on Commercial and Multi-Family loans?
- Yes. We have multiple options for those products. The process is longer and has unique requirements, but we even have some options that do not require income documentation for strong borrowers with assets and solid credit.
- What are your credit requirements?
- We offer many different products, but we do not have a minimum FICO score for hard money loans for single family flips. That said, we do require proven ability to pay debts. We consider many factors including experience, credit, assets, and a few other factors, but we are reasonable and flexible.
If you are wanting to hold properties as rentals, especially using Conventional Financing, you must be pre-approved and there are far more rigid credit, income and asset requirements and we must get you pre-qualified before closing your hard money loan. Other products, such as commercial and multi-family loans each have unique requirements which your loan officer will review with you.