LOAN PROGRAMS AND DETAILS
Thank you for your interest in our company. Rezcap Funding specializes in “Business Purpose” loans which are essentially commercial loans made for residential real estate investors. There are 2 main types of “business purpose” loans, which are detailed below. Often times investors will use a private/hard money loan to acquire and renovate real estate, and will refinance into a DSCR loan once the property is acquired and renovated. Rezcap Funding provides financing for both and offers subsidies on the DSCR refinance if paying off a Rezcap private loan.
DSCR Specifics
- DSCR loans are long term loans typically made for investor who will retain the subject property for more than a year.
- 1 appraisal required and ordered by RezCap Funding, LLC
- Can be a 30 Year Fixed or Adjustable Rate Mortgage (ARM)
- Lower rates available with Prepayment Penalties which phase out between 1 and 5 years.
- The gross income for qualification purposes is based only on the market rent or current lease amount.
- “Short Term” rentals are allowed such as VRBO.
- There is no property ownership seasoning requirement for rate and term refinances and so often DSCR is used to refinance a private/hard money loan.
- DSCR loans are much easier to qualify for compared to “Conventional” financing. Employment and traditional income is not required. There is not a max number of properties financed rule and the reserve requirement is only 2-3 months PITIA for the subject property. Tax returns are not required for any DSCR loan, nor are any traditional income documents.
- The borrowing entity is the “LLC” that owns or will own the subject property and so the loan is considered “business purpose” and does not appear on the guarantors credit report. Mature real estate investors may use DSCR loans in lieu of Conventional loans for that reason only.
- The property must be completed and in “As Is” condition per the appraisal. The property does not have to be leased as the appraiser will use a “market rent schedule” to determine gross income.
Private/Hard Money Specifics
- Personal and Business Tax Returns for the most recent year and a year to date profit and loss
- Most recent 2 months asset statements for the business and/or guarantors
- Drivers license copy for all guarantors
- Personal Financial Statement (PFS) for guarantors
- Executed Sales Contract (unless Pre-Approval)
- Project Scope/Description (a general idea of the project which includes the acquisition cost, the renovation amount and description of improvements, and the expected ARV)
- Completed Loan Application (apply over the phone)
- Itemized Renovation Estimate
- Entity Documents
- If LLC we need consent from the members to engage in this specific transaction, formation documents, certificate of good standing, operating agreement, proof of EIN)
- If Corporation we require company by-laws, certificate of good standing, formation documents, articles or organization, corporate resolution, and proof of EIN)
DSCR Underwriting Approval Required Items
- Home owners insurance policy good through the loan maturity date
- Completed application and credit report for guarantors required to be on the loan
- Entity documents including articles or organization, operating agreement, and proof of EIN for entity that will hold title
- Appraisal and rent schedule
- Fully executed Lease Agreement if leased
- Fully executed Sales Contract if a purchase
- Recent bank statements to source funds due at closing plus reserves. Can be personal or business accounts.
Private/Hard Money Approval Required Items
- Home owners insurance policy good through the loan maturity date or 12 months. (must include vandalism and construction rider if renovation)
- Entity documents including articles or organization, operating agreement, and proof of EIN for entity that will hold title.
- Fully executed Sales Contract if a purchase
- Recent bank statements to source funds due at closing plus reserves for payments during loan term. Can be personal or business.
- Completed loan application and credit report for guarantors required to be on the loan.
- Construction budget and specs if renovation
- General contractor profile and contact information.
- Appraisal will include a rent schedule to ensure DSCR refinance is an option
- Schedule of present and past investment properties owned and/or sold.
Loan Terms and Cost
- DSCR/Hard Money: Underwriting and Processing fees typically amount to $1900.00
- Hard Money Origination Fees and Rates: Typically 1-2% of the loan amount with min of 2k and max of 9k. Interest rates are typically 30 day SOFR plus 4-6%.
- DSCR Fees and Rates: There are many options with DSCR loans and we provide clients with a “menu” to chose from. Rates are lower the longer the term of the Prepayment Penalty and the lower the LTV/higher the credit scores. A Prepayment Penalty is not required.
- Third Party Costs to Consider: Title fees, home owners insurance, interim interest, escrows (if escrow account established), appraisal.
Closing/Draw Process
- Soon after closing, the process of renovation should begin. We understand the importance of delivering timely funds to the contractor during the process and are confident that our process allows just that. We partner with a disbursing agent in our local market that serves most of the leading commercial banks in terms of construction process. Prior to closing, we typically have a “kick off “call whereby our clients meet with the designated disbursing agent to understand the requirements and process by which to obtain draws during construction in addition to lien waivers.