Carolina Hard Money Q&A

1. What is a "hard money" or "rehab loan"? "Hard Money" loans or "rehab loans" as they are sometimes called refer to non- conventional loans. Private money sources such as those with self directed IRAs, anxious money, cash in the bank and specialty lenders usually fund them. Interest rates and points on such loans are usually higher. Terms usually range from 3 to 12 months. Hard Money loans have one basic requirement. There has to be some substantial equity in the to give the lender a reason to invest their funds in an otherwise risky venture.

So, why would you utilize a hard moneylender? The property to be purchased might be presently vacant and in need of repairs. It may be older property in a failing neighborhood which has the potential for revitalization. It may be a and can be purchased on a short sale. Or you may just need a quick to secure a property before you find an investor/rehabber to which you want to wholesale the property to. Or you may want to purchase a run down piece of property, rehab the property, and refinance it for rental income. In all these cases, you would need a hard money loan because conventional financing is just not an option or it would take too long to secure. "Hard Money" is just a cost of doing business and an effective method of doing business as a real estate investor.

2. How does the program work? We loan money in metropolitan areas to people who buy , fix them up, and sell them or refinance them to rent out. We work very hard to fund quickly so that you can demand large discounts from your sellers. We normally lend only on single-family residential houses. Our program is very good for people who can buy right, fix a property up quickly, and then get it re-sold or refinanced. There are three easy steps to our loan process: submit an application to get pre- approved, find a property and get it under contract and send us the information, prepare a cost estimate for repairs and then we process and close the loan.

3. What are the costs? Closing costs are usually five (4-5) points plus the other cost associated with any other loan closing such as attorneys fees, processing fee, recording fees, etc. This is a typical Fee Sheet for a $70,000. loan: 54,000 purchase price 16000 repairs Loan amount is 70k You will bring 5% of the loan amount 3500.00 based on loan amount Processing fee 450.00 standard fee Underwriting fee 895.00 standard fee Attny fees 800-900 varies per attorney Appraisal fee 350.00 varies per appraisal insurance 450.00 ish varies per company

Total +/- 6546.00 in addition to:

Your payment would be 875.00 per month interest only Your per diem interest is 29.16 per day, which means if you close on the 20th of the month of October you would pay 11 days of interest for the remainder of October at the closing which is 320. 83. Your first payment is due December 1 in the amount of 875.00, which would actually be the interest for November as it is paid in arrears. You would also have to pay the first deposit of the rehab to the contractor which means, whatever you work out with your contractor; some charge 1/4, 1/3 or 1/2 of the work up front. As the work is completed, we inspect the property and when the contractors needs his next draw, we release the draw money to him with your approval and per inspection. At the end of the job, the final draw is actually the money you paid him and it is paid back directly to you. There is a $150.00 draw/inspection fee charge to your rehab account for each draw.

So, at this point you would be in the deal at 76866.83 for a with an ARV of 99,000.00. If you rehabbed and held it for 4 months prior to selling it through an agent, you would pay another $5940 in realtor fees, and $2625.00 in payments. Now you are in the deal at 85432.83. So you would profit about 13567.00.

This is however just an estimate. Other costs involved may include pro-rating of taxes, insurance and interim interest. Although the term of the loan is six (6) months, there is a renewal fee charge of two (2) points of the loan balance that is paid to the lender at the time of renewal. Most of the loans are paid off within 190 days.

4. How do you decide how much to loan? We can loan up to seventy (70) percent of the after repaired value. If you are buying right, you could get in for almost no money down, however, you cannot get cash out of a hard money rehab loan.

5. Where do you loan? We loan in cities and counties with at least 300,000 people in North and South Carolina. Exceptions to the population rule are sometimes made to those with A+ credit and money in the bank or borrowers with whom we have an ongoing relationship.

6. Do I need to put any money down, or, have any money in the bank? As long as the loan to value, including purchase price and rehab cost, does not exceed seventy (70) percent you can acquire the property for very little money out of your pocket. You must however have reserves to satisfy the underwriters, usually six (6) months and pay the contractors first deposit. You cannot get cash out of a hard money rehab loan and we do not finance the closing cost.

7. How much will my payments be? Your loan is an interest only loan. To figure your monthly payment, simply multiply the interest rate by the dollar amount of your loan (including any fees or costs which were rolled into the loan). Since the interest is computed on an annual basis, you simply divide by 12 (months) to get your monthly payment. IE: 13.75% X 80,000= 11,000 11,000 divided by 12 months = 916.67 per month

8. Will you finance commercial ? We have some programs for commercial. Please contact us.

9. Will you finance buildings? Yes, up to two 65% ARV, these rates and terms, strong cash and strong credit are needed to qualify for these larger loans.

10. Do you allow interest to be deferred to the end of the loan? No. You pay interest only payments monthly during the loan term on the total loan amount. There is never interest charged in advance, no prepaid interest is brought to closing.

11. Do you require a survey? Yes, in some cases.

12. What paperwork do I need? Print or fill out the online application. We will contact you usually within forty eight (48) hours to discuss your application and inform you of additional documentation that may be needed.

13. Do you loan on rural property? No. The properties we loan on must be in a county or city with a population of at least 300,000 people. Exceptions sometimes made for those with A+ credit.

14. Does Carolina Hard Money lend on properties in the flood zone? Yes, must have .

15. Will you loan money in my corporate, LLC or trust name? All loans are made to Corporations or Trusts and must also be personally guaranteed by the borrower.

16. Do you pull my credit for each loan? We pull credit just before closing of each loan. This helps us to determine that you will still be able to qualify for the permanent financing when it comes time to refinance. Our goal is to make sure that you are able to refinance out of the hard money rehab loan as soon as possible.

17. What kind of credit rating do I need to get approved for a loan? Our approval is based upon your past credit history, credit score, funds available, credit cards(s), available balance, and the value of the property you want financed. Carolina Hard Money looks at the total overall potential of the Investor. CHM does require its investors to have an "A" credit grade. Our current score minimum is a 680 middle score. We look at your credit to get a feel for the person or persons who are borrowing the money in order to rule out borrowers who obviously never intend to or have not shown a strong repay history. We look for ways to finance your investment, not for ways to turn you down.

18. How long does it take to get approved for a loan? Within one or two days after you have submitted your loan application and documentation, we can usually make a decision or give you a general idea if we can help you.

19. How long does it take to close the loan once I have been approved? There are many factors, which prevent us from making any guarantees as to if or when a loan will close. If you have already been pre approved in advance, it normally takes around seven business days once you find a property and submit the property information to us. Sometimes it takes a little more or less. We have closed in as few as two (2) days. Many times it all depends on how long it takes to have a title search completed, get the appraisal and schedule a closing. There are other factors as well that can delay a closing. Always allow yourself plenty of time when writing your contract.

20. Should I have a property under contract before I fill out the loan application? Carolina Hard Money can pre-approve you for our loan program prior to your finding the right investment property. Our process is two-fold: first we approve the applicant, then we approve the investment property you are interested in financing. We recommend that you go ahead and get pre approved so once you find a property to purchase then we can close faster.

21. What is the term of the loan? We write 6-month and 9-month interest only loans. We charge five (4-5) points at closing. If renewal is needed after 6 months or 9 months an additional two (2) points renewal fee is paid to the lender for one ninety (90) day period. The average life of a hard money rehab loan is 180 days. The purpose of a hard money rehab loan is to either turn the property quickly or have it rehabbed and refinanced with a conventional lender. Carolina Hard Money does not have any prepayment penalties; you may prepay the loan anytime you wish prior to the term of the loan.

22. How do I get refinanced to pay off the hard money rehab loan? If you are purchasing a property to rehab and rent, you can begin processing your refinance loan as soon as the repairs are complete and the final inspection has been made. You may also seek alternate sources to refinance and pay off your rehab loan if you wish.

23. What is the interest rate charged? The current interest rate is 13.75%.

24. Can I get purchase and rehab money too? The Lender will fund the purchase and all your repairs including most closing costs up to seventy (70) percent LTV if you qualify. We do require you to complete a detailed, itemized repair list of the repair work. A draw schedule identifies the number and amount of each draw. After a certain percentage of the repairs have been completed and verified, the monies are forwarded to you.

26. How many investment properties can I finance at one time? We will start with one property until we have an established a business relationship with you. As you become more experienced and have successfully completed a few loans with us, we can look at funding up to 2 properties as they are identified.

27. Do I need to get an appraisal? Carolina Hard Money will order an appraisal from a qualified appraiser who is familiar with evaluating investment properties. The appraiser will determine an "after repaired value" (ARV) based on the list of repairs that you and or your contractor will be completing.

28. How does the draw procedure work? You may have as many as five (5) draws as described in the "Rehab Loan Draw Schedule". Each draw request will require an inspection to ensure that the work is completed in a thorough and professional manner. After completing a certain percentage of the required work, you will fill out a "Draw Request Form" and forward this to CHM. We will schedule an inspector to visit your property and authorize release of your funds. The inspector is one approved by CHM. There will be a $150 inspection fee charged for each draw, which is deducted from the total draw amount. If you request a draw and the work requested for reimbursement is not complete, you will be charged for the initial inspection and for the re-inspection, if you request one. Upon completion of the complete project you (and the contractor if there is one) will sign a completion certificate verifying all work is complete and code violations if any have been satisfied. Your payments must be current in order to draw funds. Draws will not be released on or after the first payment is due and not received.

29. Do you make loans on rental property? Yes, we do loans on rental property. It is usually when the property needs to be rehabbed prior to being rentable. When the renovation is completed, you will need to have the property refinanced.

30. What type of insurance do I need on the property? Before closing you will need to have a one-year prepaid vacant dwelling fire policy in place or builders risk.

31. Is this a non-recourse loan? Yes. The sole remedy for failure to pay is the for the house.

32. Do you also make traditional loans to investors? No. You must get approved for the refinance with a traditional lender.

33. Where do I get an application and other forms needed? All forms needed to apply, get pre-approved and also to submit your property for approval are on our website. www.carolinahardmoney.com.

34. Do I need to be an experienced rehabber to qualify? The majority of our borrowers are experienced in and rehabbing. Investors with limited experience can still qualify on a case by case basis. We will recommend a list of proven, experienced contractors for you to work with to estimate and complete the repairs.

All programs and guidelines are subject to changes, modifications, deletions and/or cancellations.