Hello and thank you for choosing Full Force Funding to provide the financing for your project! This document provides a comprehensive overview of our process and tips on how to make the transaction as smooth as possible for everyone involved.
- Along with this guide, we have sent you a Preliminary Term Sheet detailing the initial terms of your loan including loan amount, interest rate, origination fee, and any additional fees. These terms are based on the preliminary application that you submitted online. They do not represent a commitment to lend, but are a quote of the terms we expect to be able to provide pending a full review of all required documents, a third-party appraisal, and underwriting approval. Please review the terms, let us know if you have any questions, and return the signed term sheet when you are ready to proceed.
- Also attached to the welcome email is a checklist of the documents that we require for underwriting titled FFF Submission Checklist/PFS. Please refer to the checklist and mark each item complete as you gather the documents. Below are tips and best practices for some of these documents.
- Personal Financial Statement: This document is included as pages 2-3 of the FFF Submission Checklist/PFS document. Complete one PFS for each guarantor of the loan. Each entity member with 10% or more ownership of the entity must guarantee the loan. Complete the PFS as fully as possible. The most important items to include are “Cash on Hand”, “Real Estate”, “Total Liabilities”, “Net Worth”, and “Income”. All of these items are stated and will not be verified other than “Real Estate Owned” being cross-referenced with your experience list. Please sign and date the PFS.
- Entity Bylaws/Operating Agreement: Please ensure that this documents details the members of the entity and their ownership percentages, and is also signed by each member. Each entity member with 10% or more ownership of the entity must guarantee the loan. If an entity member does not want to guarantee the loan, please reduce their ownership percentage to less than 10% through an amendment to the operating agreement.
Scope of Work: We can either accept the scope of work on our template attached to the welcome email, or you may provide it in your own format or the contractor’s bid, so long as the cost per line item is included. If you are providing the contractor’s bid, please also send us a summary of the renovations being completed – any square footage being added, anything out of the ordinary that is adding significant value. Please send any copies of permits or plans as well, if any.
- Experience: Please complete this document as fully possible with all past projects – flips, rentals, and commercial properties for all members of the borrowing entity. You may also include any JV deals in which the guarantors were involved but not necessarily on title. In general, we are looking to see that the borrower has had past projects with budgets that are similar or larger than the budget of the current project.
- Insurance: Attached to the welcome email are our insurance requirements. Please provide the requirements to your agent early on in the process as it is common for closings to be delayed if the insurance comes in last minute. We will also provide you with a policy quote from Berkshire Hathaway once the loan is clear to close. This quote always meets the requirements and choosing to go with it streamlines the process. You do not need to use it, but it makes things simpler. The cost is competitive, and often lower than borrower-provided quotes.
- Once you have signed the Preliminary Term Sheet and returned the Credit Authorization, we will send an invoice for our application fee, which is $150. This covers the cost of the credit report, the background check, and processing. We will send you a copy of your credit report. Our minimum allowable score for purchases is 620, and for refinances is 680. Scores sub-675 may result in a reduction in leverage or an increase in your rate. Any derogatory marks on your credit report will require a letter of explanation.
- Once you have signed the Preliminary Term Sheet, we will also send you an appraisal order form. We allow you to order the appraisal yourself from a local expert. If you do not have an appraiser you would like to use, we can order it from our network. We highly advise asking your realtor or other local investors for their appraiser recommendations as having someone who knows the area well will lead to the most accurate appraisal.
- Please provide the order form to the appraiser, and pay for the appraisal directly. For purchase transactions we require the ARV value only. Whether or not we are able to lend depends primarily on the ARV value. It needs to come in high enough so that the project is profitable or we cannot approve the loan. Generally, you should be making at least a 40% cash on cash return. Before ordering the appraisal please be sure that you have, spoken with a realtor, checked comps, or pulled a CMA report to make sure your ARV expectations are reasonable.
- Once all documents have been provided, including the appraisal, and any needed updates have been made, the file will go to our underwriter and loan committee for review. They will address any unclear items, possibly adjust terms if the underwriting process has brought additional risk to light, and then give the clear to close.
- With the clear to close, our closing attorney will reach out to the title company/escrow/attorney to schedule the closing and coordinate loan docs. The funds will be wired once loan docs are signed. The coordination of closing generally takes 2-3 days.
- After closing, when you are ready for your first draw, please send an email requesting the draw that includes the project Scope of Work, updated to note which items have been completed. We will order an inspection and the inspector will determine the percentage completion of the project and that percentage will be released in the draw. Please note that the draws are a reimbursement of work fully completed.
Thank you again for choosing Full Force Funding as your lender. We look forward to providing you with a smooth and hassle-free process.