I recently funded a loan in Philadelphia and I had a few people ask me about the story behind it. Every loan has a story and as a lender, I love hearing the stories behind the loans. So I thought I’d share the story of this one with you as well.
The Deal
As always, each loan starts out with a conversation with a borrower. This borrower came to me as a referral from a mortgage broker. He was looking for funding on a property in Philly. He was purchasing the property for $45,000 and was estimating to put $90,000 in rehab. He felt he could sell the house for $275,000 or more.
Experience Matters
After talking about property, I asked more about the borrower and his experience. He had done 5 fix and flip projects in the past 2 years. He had partnered with another RE investor who owned these properties to fix them up and sell them for a share of the profit. I looked at the photos of each project he had done and I was impressed with the outcome. The houses looked amazing and each were sold with a handsome profit margin.
Credit Story
I also asked about his credit. As you may already know, credit score is not a deal breaker for me. I want to understand the story your credit history is telling. In this case, the borrower hit a rough patch financially almost 7 years ago which brought his score down. However, his credit report showed that he was trending in a positive direction over the last few years. Because I don’t base my decisions on credit scores alone, I was able work with him on this challenge more than a bank would.
Financial Situation
We also talked about his financial situation and cash on hand. He was in a strong cash position and was already planning to fund most of the purchase price himself. He was also willing to cover the closing and holding costs for the project. This is something that is important. Having a borrower who is already planning to have a financial stake in the deal shows they are serious and committed to the project before it starts.
Outcome
After talking to the borrower and validating what he told me through doc review and underwriting, I was very happy to lend on this opportunity and start forming a partnership with this borrower. We agreed to a loan of $115,000 on a 6 month term with monthly interest-only payments. This turned out to be a 42% LTV. We closed in 15 days and the borrower had his construction team start working on the project the day after closing.
This was a great example of a win-win situation. The borrower was able to get the funding he needed quickly and I was able to lend on a good deal with a new borrowing partner.
Hope this was helpful for you. If you're looking for a loan on your next deal, please feel free to reach out at 484-706-9601 or apply online at www.wingspreadlending.com
Not ready to apply for a loan? We're always happy to connect with people to see how we can help in the future!
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