Four Things to Know About Chicago Rehab Loans

If you’ve recently purchased a property and are looking to rehab it, one way to expedite the process is by applying for a rehab loan. With a rehab loan, you can bring a home up to code, renovate for safety, and redecorate, all without waiting to save up to fix up an empty building. Renovating with a rehab loan allows you to put the building back into the real estate market and earn money on it sooner, particularly if you’ll be renting the building out.  There are some things you need to know before applying for a Chicago rehab loan, however, so that you’re prepared.

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Source: lanhamassociates.com

Appraisal and Inspection

In order to qualify for a loan, the property will need to be inspected and appraised, which you will have to pay for out of pocket. This is because the loan amount is based on a percentage of the future, after-repaired value of the property, and in order for that to be determined, a current value must be assessed. The appraisal must be done by an independent appraiser, as well—not the borrower.

Speed of Loan Closing

Traditional mortgage loans can be a lengthy process. However, rehab loans are much quicker. At Select Funding, loans can be closed on within 10 to 14 days from application. After the loan is approved, rehab funds are dispersed quickly—typically within 24 hours. This is beneficial for you, as it means you can start on renovations sooner.

Types of Properties Accepted

At Select Funding, the only types of properties we lend on are non-owner occupied properties—for example, a rehab loan on your own home would not be approved. We specialize in Chicago rehab loans for single family residences, as well as 2-, 3-, or 4-unit buildings. This allows for community growth, as dilapidated buildings can be revived and more people can move in rather than allowing a property to sit vacant and deteriorating.

What Type of Down Payment is Required?

Typically, 10% of the purchase price of $5,000 is the minimum down payment required for a rehab loan. Sometimes, you will need to pay additional fees or costs at closing, however all of these things are amounts that your rehab loan broker would discuss with you prior to closing. This low down payment puts purchasing and renovation within reach for people who otherwise would likely not be able to purchase.