RESIDENTIAL BRIDGE LOAN
Fix and Flip / Fix and Hold Loans
Introduction
Our Residential Bridge Loan program is a great option for real estate investors who are looking for long-term financing to purchase financially distressed properties and then add value to these properties in various ways. Also known as fix and flip or fix and hold properties, they are bought at prices at or below their market value, renovated or enhanced, and then sold or leased out at a higher value.
Our loan program aims at providing real estate investors with the necessary financial backing to purchase distressed properties, restore them, and earn a healthy return in the process. Our loans cover the costs of any upgrades, renovations, reconstructions, and most soft costs related to property fixing.
A major benefit of our Residential Bridge Loan is our speedy application process, which allows investors to easily access funds. This way, they do not miss out on fresh opportunities in the real estate market.
Program Overview
Fort Knox Capital’s residential bridge loans are issued to investors for the financing of single-family homes, condos, townhomes, and 2-4 unit properties located in non-rural areas. We offer loan amounts of up to $25 million, lending up to 80% on the purchase of a property, up to 75% for refinancing and cash-out refinancing, and up to 100% of the rehabilitation budget.
Our loan terms range from 6 to 24 months with interest-only rates starting at 7.5% to be paid over the set period. The residential bridge loan is available to individuals, corporations, and foreign nationals with a FICO of 640 and above. Our origination fees start at 1.5% – 3% to process a residential bridge loan application.
Fix and Flip / Fix and Hold Loans
Our Residential Bridge loans may be used to Acquire or Refinance property quickly either for Rehab, Repair, Lease up the units or to simply Sell it for a profit.
Quote Requirements
A quote would usually comprise essential information such as the monthly payments due, the interest rates, as well as the total closing costs you would incur for a residential bridge loan. Thus, giving necessary and accurate details is crucial to avoid false quotes. Below are the vital details we require to deliver a soft quote:
Due Diligence
After an investor has decided to proceed with the quote that we have provided, a letter of intent will be issued along with an appraisal fee (which must be paid in advance) to request an appraisal. The sum to be paid as an appraisal fee is determined by factors such as the investment property’s location, size, available comparables, rehab budget review, and if ARV is needed.
Item Review:
While we await the appraisal and title reports during our due diligence, we ask for several documents that will be required for internal review. These documents assist us in simplifying the underwriting process.
Guarantor(s)
- Completed Application
- Two months of bank / financial statements (all pages)
- Personal Financial Statement
- Real Estate Owned or REO schedule
- Credit Authorization
- ID
Borrowing Entity
- Articles of Incorporation
- Operating Agreement
- Organization Chart (if any)
- Federal EIN letter
Property
- Purchase and Sale Agreement (if purchase)
- Trailing 12 months of Rental history from the rental site or bank statements (if rented).
- Insurance policy and contact info.
- Tax Statement
- HOA contact info or questionnaire (if any)
- Property management agreements (if any)
- Property management resume (if any)
- Current mortgage statement or payoff (if refi)
Residential Property Types
Condos
Condos are single units in a residential building and are usually owned by various individuals. The affordability of these properties amidst the increasing home prices and mortgage rates keeps them in high demand among residential real estate investors.
Unlike traditional homes, condos are typically cheaper to purchase and maintain, and most often come with additional amenities. Financing condos for residential property investments can generate immense income for a real estate investor.
Single-Family Rentals
A single-family residence is a single-unit residential property consisting of general spaces and facilities for use by the occupants of the property. When it comes to alternative investments, single-family residences are hard to beat. These properties are fast-growing in the housing market and have yielded tremendous returns as they appreciate rapidly over time.
Townhomes
Also known as row houses, townhomes are built as single-unit properties. These properties are relatively similar, yet different from single-family residences. Unlike SFRs, they are attached to multiple preexisting homes, like other townhomes. They are also usually built with multiple levels, as such, they may have up to two or three levels.
Townhomes require a lower level of maintenance and are cheaper to purchase, build, or fix than most single-family residences. This makes them promising investments for fix and flip investors.
2-4 Unit Properties
Duplexes, triplexes, and quad-plexes are generally regarded as 2-4 unit properties. These properties are mini apartment buildings with two, three, or four functional units for residence. Each unit has the same amenities as a single-family residence, such as bedrooms, bathrooms, living rooms, and kitchens.
As residential property investments, 2-4 unit properties provide several benefits to investors. They can spread maintenance expenses across the various available units instead of having just a single unit. In addition to this, it is relatively cheaper to purchase a 2-4 unit property than multiple single-family residences.
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FAQs
What is a Residential Bridge Loan?
A residential bridge loan is a form of financing that gives real estate investors the flexibility to borrow money in the short term to acquire a residential investment property intended for lease or sale. This loan provides immediate financing pending the time investors secure permanent financing. Also, in many cases, investors use the equity in one investment property to facilitate the purchase of another investment property before they can sell the property used as the down payment.
We offer the best residential bridge loan financing to investors for single-family rentals, condos, townhomes, and 2-4 unit properties located in non-rural areas. A residential bridge loan from us will fund anything from the acquisition, refinancing, and rehabilitation of residential investment property at reasonable interest rates. With this loan, investors can get adequate financing for completing property rehabilitation before its subsequent sale or lease.
How Do Residential Bridge Loans Work?
Residential bridge loans work as an excellent alternative in times when financing is required but not available. A residential bridge loan can only be used to fund the purchase and renovation of residential investments. Real estate investors can also take out a residential bridge loan by cashing out the equity of one property with minimal underwriting to purchase another investment property.
The interest rates on residential bridge loans start at 7.5% to be paid over a 6 to 24-month period. Residential bridge loans are available to both new and experienced investors as long as they qualify.
To qualify for a residential bridge loan, investors must have the required FICO score of 640 and above, a lender-ordered appraisal with sufficient residential investment experience, a down payment, and 3 months of PITI (principal, interest, tax, and insurance) reserve.
What are the Benefits of Residential Bridge Loans?
Residential bridge loans come with benefits for the real estate investor. They are:
- Residential bridge loans offer real estate investors a faster and much easier application and qualifying process for underwriting guidelines. Hence, facilitating the immediate purchase, refinancing, and rehabilitation of residential property assets to increase property value and return on investment upon sale or lease.
How Do I Qualify for a Residential Bridge Loan?
To qualify for a residential bridge loan, investors must meet certain requirements. Here are the basics:
- Maintain a credit score of 640 and above with a long credit history, and no outstanding debts within the last 24 months.
- After making the down payment, you would have to provide proof of that, as well as 3 months’ worth of PITI payments as your reserves. This pertains to property purchases, refinances, and renovations. Your financial reserves should include your monthly principal, interest, tax, and insurance payments.
How Does My FICO Score Affect My Ability to Obtain a Residential Bridge Loan?
Your FICO score is a three-digit number calculated based on the information in your credit report. This score determines whether you will be able to get a residential bridge loan from us. Higher scores indicate that you have a better credit history, and with a FICO score of 640 and above, you would have no problems securing a bridge loan for your residential property investment.
We use the middle scores from the three major credit reporting agencies; Equifax, Experian, and TransUnion, to decide what rates to offer you. The FICO score helps us determine how likely an investor is to repay a loan. It also affects the loan amount, the loan term, and the interest rates. A low FICO score means a reduced loan amount and a higher interest rate.
Your FICO score is an important element in our decision-making as DSCR lenders. Any error in your credit report can result in the issuance of a wrong loan. Therefore, you should always cross-check your credit report for mistakes before applying for a loan.
Can I Get a Residential Bridge Loan for Rural Properties?
No, we do not offer residential bridge loans for rural properties at Fort Knox Capital. However, our residential bridge loan program caters entirely to investors looking to purchase, refinance, and renovate an investment property in non-rural areas. This is a result of the high level of supply and demand and the absence of locational limitations for making a profit if managed professionally.
What Are the Types of Residential Bridge Loans?
The types of residential bridge loans include closed bridge loans, open bridge loans, first-charge bridge loans, and second-charge bridge loans. A closed bridge loan is one whose repayment date has already been agreed upon by both parties. You should consider this type of bridge loan if you are certain you will be able to pay it back within a fixed period.
With an open bridge loan, the repayment method and date are not fixed beforehand, making it a good choice for investors who are not certain when they will be securing funds. A first charge bridge loan gives us a primary right to your collateral, which can then be sold if you default on your loan payment. However, a second charge bridge loan gives the lender a secondary right to the provided collateral, thus leading to increased interest rates as a result of increased risks.
How Long Will it Take to Close a Residential Bridge Loan?
The time it will take to close a residential bridge loan largely depends on the loan product you choose and how quickly you respond to our terms. However, thanks to the high-end technology we make use of, you will find it easy to submit all the required documents, which will then be reviewed by our legal team. If all goes well, your loan should be ready within no more than 2 weeks.
Does My Property Need Insurance to Qualify for a Loan?
Yes, your collateral needs to have property damage insurance, such as hazard, liability, and flood insurance. Other types of insurance coverage needed will depend on the loan amount you are looking to get. Most importantly, your insurance coverage must be active throughout the loan.
What is the Difference Between a Bridge Loan and a Mortgage?
The difference between a bridge loan and a mortgage is that a bridge loan can be gotten to finance a property that is not in a habitable condition and needs refurbishing, while a mortgage can only be procured for properties that are suitable to be occupied.
