Understanding a Loan Term Sheet
The purpose of a loan term sheet is to give a loan applicant a sense of the parameters and terms of the loan they are requesting. Understanding a hard money loan term sheet can be difficult for new real estate investors, or those not familiar with the process.
Here is a breakdown of common lending terms and requirements.
Hard Money Loan Lending Terms
There are multiple important stipulations in a lending sheet. It is imperative to comprehend the language before finalizing a loan for your investment property. Here are the meanings of common terms:
- ARV or After Repair Value: The value of a property after repairs have been completed. This is derived by pulling comparable sales from the last 180 days.
- Purchase Price: Sales price on the contract.
- Repairs: Contractor bid or scope of work of repairs needed to reach the ARV value.
- Loan Amount: Total amount loaned for the acquisitions and repairs.
- LTV or Loan to Value: Percentage of the loan amount compared to ARV.
- LTC or Loan to Cost: Percentage of the loan amount compared to the total cost of the acquisitions and repairs.
- Holdback: When the lender retains the repair amount to be drawn out as the project is completed.
- Funded at Closing: The amount DFW Hard Money funds at the closing.
- Close Date: The date of closing at the title company.
- Per Diem Days: Number of days left in the month of the closing.
- Points: Points refer to the origination fee for originating the loan.
- Closing Fee: This consists of common lender fees such as documentations, appraisal and more.
- Prorated Interest: This is the number of days left in the month after closing as the interest is paid.
- Per Diem Amount: The daily interest amounts due on the loan.
- Down Payment: Your purchase price plus repairs costs minus the loan amount.
- Estimated Title Fees: estimate of all the title and closing fees in the transaction
- Earnest/Deposit Credited: The earnest money amount listed on the contract or the deposit amount paid on a wholesale transaction.
- Total Due at Closing: Total dollar amount the buyer will have to bring to closing.
How DFW Hard Money Loan Term Sheet Works After the loan applicant receives and reviews the lending term sheet, they can accept, sign, and return the document to DFW Hard Money. The deal then goes into
After the loan applicant receives and reviews the lending term sheet, they can accept, sign, and return the document to DFW Hard Money. The deal then goes into underwriting.
If the applicant rejects the lending terms and a deal cannot be made, then they may walk away. The term sheet is not binding, so there are no fees or penalties.
Loan Term Requirements
Like any property transaction, there are requirements for a loan. Here are some of the loan requirements at DFW Hard Money and their meanings:
- Lender must be in first position or first lien: This means DFW is the first to be paid if a borrower defaults and the property or asset was used as collateral.
- Personal guarantee: This means that if the business that acquired the loan from DFW, becomes unable to repay it, the individual assumes personal responsibility for the debt.
- Non-owner-occupied loans only: This means the property owner does not occupy the property as their personal residence.
- Insurance: Property insurance is required for the duration of the loan.
- Title policy or insurance: This protects the buyer and DFW Hard Money against problems during the transfer of property ownership.
- Tax certificate: A Tax Certificate provides evidence of taxes paid or unpaid to each property taxing authority.
We have a simple application process with same day approvals and 24-hour closings. No obligations are necessary to fill out an application and receive a loan term sheet from us.
The Bottom Line
Lending terms can be confusing to understand, but DFW Hard Money is here to walk you through the sheet and make your hard money loan process as seamless as possible. Reach out today to get in touch with our team or get started on your application. We fund real estate projects in Texas, Colorado, Missouri, Kansas, Tennessee, Georgia, Oklahoma, and North Carolina.