13. The Secret Formula Renovation Mathematics 1.) Sales Price 2.) + Repairs (+15%) 3.) = Total Investment 4.) < After Improved Value 5.) = Good Opportunity X LTV 96.5% 6.) = Loan Amount times X =Payment (P&I) + Taxes + HO Insurance + MIP 7.) = Total Monthly Payment 8.) = Affordability
14. Example: Determining the Maximum Loan Amount EXAMPLE: purchase of a 1-unit property with 96.50% LTV/CLTV Purchase and Renovation Costs Sales Price $ 120,000.00 Labor/Material $ 24,500.00 Contingency (10%) $ 2,450.00 Soft Costs (permits, consultant fees, inspection fees, PITI, etc.) $ 2,420.00 Supplemental Origination Fee (greater of $350 or 1.5% of the renovation costs) $ 440.55 Total for Purchase and Renovation $ 149,810.55 “ As-completed” value (determined by appraiser) $ 160,000.00 Value to use for determination of LTV must be the lesser of the total cost of renovation or the “as-completed” value. In this example, $149,810.55 is less than $160,000, therefore the value you must use when determining the maximum loan amount is $149,810.55. Maximum Loan Amount at 96.50% $ 144,567.13
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17. Application Process Borrower locates property in need of repairs or determines that his/her current home needs improvements Borrower determines improvements needed and schedules an inspection with a cost consultant (or creates a list of improvements) Note: A cost consultant is not required on Streamline transactions Cost consultant or borrower completes the work write-up and prepares contractor bid packages to obtain cost estimates Appraiser uses work write-up to determine “as-is” and “improved value” Construction begins within 30 days of loan closing — must be completed in six months or less
18. The Process Fulfillment 4.) Mortgage Application Documentation, Credit, Income, Assets $$$ App Fee, Inspection, Appraisal 5.) Processing – Underwriting Documentation, Verification Contractors Package 6.) Closing - $$$$$$ Development 7.) Repair Project Schedules, Draws, Responsibilities 8.) Enjoy A Home Of Your Own Homework 1.) Prequalification Documentation, Credit, Income, Assets (SP + R) X LTV = Loan Amt 2.) Property Analysis (SP + R) < AIV, Loan, Paymt, Affordability, Contractor Choice 3.) Contract of Sale - $$$ Deposit
PLEASE REVIEW ALL SPEAKES NOTES. This deck is designed to deliver to a Real Estate Referral Partner, in their sales meeting, to listing and/or selling agents. It is particularly effective with REO Brokers both listing and selling Brokers.
Then we calculate the loan and validate the qualification on real numbers. You can see here where, if you simply qualify someone on their income and they go to look for a house at the max loan amount you gave them, its not going to work. As an example, if we qualify someone traditionally for $200,00 and they go look at REO being sold at $200,000 once we add in the repairs it isn't going to work. When we qualify someone we council them on this being the loan amount, not the sale price, and they should look in the $150,000 range that might need $50,000 in work . We need to qualify our buyers for the loan amount not the sales price.
When we close it is a fully funded loan, we payoff the seller, you get paid and go to the next deal, and we put the money for the repairs in escrow and administer them through a system of inspections, draw requests and partial fundings through the project.
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