Residential Real Estate
Loans & Funding

1. A person sells a house for $60,000
2. Get a contract on the house for $60,000
   purchased the home from (B) for $200,000
3. B goes to the transactional funder because they have a contract with both A and C (because you can show C as being a pre-approved back-end buyer for the amount that the house is being purchased for.
4. After obtaining an estimate for construction/rehab of 45,000, (B) Must submit the contract with (a), (B) Must submit the contract with (C), and then C- again has to show that he is an approved back-end buyer for the amount of money the house is being purchased for.

1. A person has submitted all of the documentation, with a credit score of 680 (from all three bureaus)
2. They received $150,000 from a line of credit.
3. They spent $45,000 of the $150,000 to cover the rehab costs.
4. Next, they get a rehab loan for 85% LTV (so they made a down payment of $6,750 which is 15% of the $45,000).

So that means that 85% of the rehab was financed.

Now because all the documentation is submitted, the transactional funder/hard money lender will put up the $60,000 for (B) within 72 hours or more. The contract total cost of the purchase equates to 105,000.

The transactional funder/ hard money lender sees that (B) has a monetary spread (105,000 to 200,000), so the transactional funder/hard money lender provides the 60,000 (B). Transactional funding will charge of their money that was loaned to B after closing on the house.

After expenses ($60,000 x 5%= $3,000 to transactional funder plus the original $60,000/ plus $45,000 on rehab equates to $108,000 in expenses. This house was sold for $200,000 which leaves a profit of $92,000.