As the real estate market continues to experience a shortage of available properties, investors are turning to older or rundown homes to renovate. This approach is appealing because of its potential profitability and positive impact on the housing market.
However, financing these projects can be complicated, especially when it comes to the loan and draw processes.
Let’s explore the fix and flip loan process, as well as LendSure’s specific loan process and fix and flip loan draw process.
Fix and Flip Loan Process Overview
The fix and flip loan process is designed to keep client projects moving forward without delay. It starts when an investor submits an application detailing their project, including the property’s purchase price and estimated renovation costs.
Lenders then assess the application, evaluating the investor’s experience, creditworthiness, and project viability. Once approved, the loan moves to the draw phase.
A Breakdown of LendSure’s Fix and Flip Loan Process
- Fix and Flip Loan Application: LendSure simplifies the application process, making it significantly shorter than the standard Uniform Residential Loan Application (URLA).
- Term Sheet Issued: Investors receive a term sheet quickly. This document is straightforward without needing a loan estimate or disclosures, bypassing the typical requirements of the TILA-RESPA Integrated Disclosure (TRID) rule.
- Signed Term Sheet and Documentation: After reviewing, the investor returns the signed term sheet along with any required documentation to move forward.
- Underwriting: The account manager forwards the application to underwriting, where an underwriter prepares a conditional loan approval based on the provided documents.
- Clear to Close: Once all conditions are satisfied, the account manager coordinates to obtain a clear to close, signaling that the loan is approved and ready for funding.
- Funding: With the final approval in place, the investor can proceed with purchasing and renovating the property.
LendSure’s Fix and Flip Loan Draw Process Explained
Unlike traditional loans, the Fix and Flip loan disbursement is structured around the draw process. This method ensures that funds are available as needed, aligning with the progress of the renovation.
Here’s how it works:
- Staged Disbursements: The construction loan is dispersed in stages, correlating with significant milestones in the renovation process. This staged approach ensures that funds are used efficiently and for their intended purpose.
- Draw Requests: When a stage of construction is completed, the client submits a draw request to LendSure. This request includes documentation of the work completed, such as construction progress inspections and copies of paid invoices for the work done.
- Review and Approval: LendSure reviews each draw request, verifying the completion of work through required documentation, which may include title rundowns and additional inspections. This thorough review process ensures that the project is progressing as planned and that funds are being allocated appropriately.
- Reimbursement Based on Completion: Upon approval of the draw request, the client is reimbursed for the completed work. The amount reimbursed is based on a predetermined loan-to-cost ratio, ensuring that the loan amount aligns with the value added to the property through renovations.
This draw process is essential for maintaining a healthy cash flow throughout the renovation phase, allowing investors to manage their resources effectively and avoid overextension.
Why Choose LendSure’s Fix and Flip Program?
We strive to deliver an answer on fix and flip loan applications within hours, not days, and work with clients with credit scores as low as 660. Our program supports a broad range of non-owner occupied properties, offering up to 85% financing for purchases and 100% for construction loan amounts, capped at 85% of total project cost or 70% of the after-repair value. Find out more here.
Want to learn more? Go to part 1 and part 2 of our Fix and Flip loan blog series to explore:
The LendSure Way
It’s simple. We make loans that make sense. We’re not in-the-box lenders. Of course, there are numbers ratios, and data to consider, but we know that behind every file, there’s an individual with a unique circumstance seeking a loan. We work hard to offer our common-sense take on lending to borrowers seeking funding for the home of their dreams, another addition to their investment property portfolio, or refinancing of a currently-owned property.
Are you ready to benefit from a common-sense approach to lending? Contact us today to learn more about non-QM loans and how partnering with LendSure Mortgage Corp. can help grow your bottom line.
