What Is A Rehab Loan?

Nov 03, 2021

A rehab loan, also referred to as a renovation loan, is a type of loan that enables homebuyers and homeowners to finance the renovation of a home through a single mortgage. Instead of applying for multiple loans, a rehab loan allows homebuyers to purchase or refinance their primary home and renovate it with one convenient loan. By allowing the buyer to finance the cost of improvements into the purchase or refinance of a home, home rehab loans take the financial guesswork and frustration out of renovating a home.

A hard money rehab loan works for the real estate investor who wants to pay cash for the purchase of a property and needs additional money to prepare the property for resale. Hard money rehab loans also work for the borrower who already owns a property and needs additional financing to complete improvements. There are many variations to rehab loans, each lender will explain their criteria. Rehab loans can expedite the completion of a property to get it on the market. A hard money lender will typically want a client to adhere to a proposed plan of improvements. Failing to do so will cause delays. There are also necessary inspections throughout the process. This ensures that a lender can fund the work as completed.

Rehab loans can be offered in many formats. Therefore, it is best for a borrower to discuss rehab loans directly with a lender.

How does a rehab loan work?

Private lenders focus heavily on collateral, i.e. an investment property that secures a hard money loan. However, it’s always a good idea to get pre-qualified before you start house hunting. A hard money lender looks at your credibility as a potential real estate investor. How is the market in the target investment area? What is the availability of resources, other property inventory, and demand for the property at resale or rental?

Since the current real estate market is experiencing record low-interest mortgage rates, and higher demand than supply, more and more buyers are seeking creative options to take advantage of the booming housing market.

When Should I Use a Rehab Loan?

Rehab loans are best utilized for non-structural repairs, such as getting new flooring or renovating a bathroom or kitchen.

What Are the Steps to Getting a Rehab Loan?

The steps to getting a rehab loan are very similar to those of a traditional home purchase, with the added steps of finding and securing a contractor to perform the renovation.

  1. Apply for the loan with a reputable lender
  2. Get approved
  3. Choose a contractor
  4. Get estimates and bids
  5. Close on the loan
  6. Complete repairs

How To Choose A Hard Money Lender

Finding the right hard money lender may seem hard, but it’s not. Use Google, reviews, client referrals, and word of mouth to find the best lender for you. It is important to do your research when looking for the right hard money lender.

Here are some things to look for when deciding which hard money lender is right for you.

  • Reputation. Check their online reviews and ask around to get feedback from their past clients.
  • Trustworthiness. Make sure they are licensed, bonded, and insured.
  • Speed. The best hard money lenders don't have complicated approval processes and won't make you wait for funds for a long period of time.
  • Flexibility. How do they look at you as a borrower and what do they consider collateral in order for them to grant you the loan.
  • Loan Rates and Terms.  Shop for the best loan rates and terms that you can find.  Keep in mind, these can vary state by state.

Contact The HardMoney Company

If you are looking for a trustworthy, well-funded, and insured hard money lender, then The HardMoney Company is here for you. We have loaned over 1 billion dollars for investment properties, and we have the quickest and most secure process for our clients. We take pride in the loyalty of our repeat customers. Our clients use our lending services over and over again because we are an excellent partner. Please give us a call or fill out our easy application online.