Loan Application Process

What is my first step to obtaining a loan with NavCap?

Your first step should be to register on our website. Once you have logged in, you'll have access to all of our loan documentation and can begin the automated application process. On your account page, you will see a list of documents on the right hand side starting with the proof of funds letter. You can generate a proof of funds letter once you have located a property and use it to obtain a contract on that property. It's a non-binding document. 

Watch this short video for a step by step guide to our application process. 

Do I need a certain credit score to obtain financing? 

As part of the application process, borrowers will authorize NavCap to run a credit check. Currently, we are working with borrowers who have a credit score above 600. We check for any active foreclosures or open tax liens as they may negatively impact the borrower’s ability to acquire additional property and affect the borrower’s profitability on their current project. It's an effort to make sure that our borrowers are on solid financial footing. 

How much experience do I need to get a loan?

We work with real estate investors at all experience levels. Whether you have a long list of successful projects or limited to no experience, we can tailor a loan package to meet your needs. Of course, having a proven track record is always a good thing so the more experience you have, the better—especially when it comes to the terms and rates we can offer. 

To allow you to quantify your experience, we have put together a spreadsheet where you can enter the property details for each project you have closed in the last 36 months. You can access this spreadsheet through Google by logging into your Google account and making a copy, or download it as an Excel sheet or printable PDF document

What are your rates? 

Our rates are negotiable and are based on many factors including the history of the borrower and the financial strength of each individual deal. We offer competitive market rates in addition to strategic guidance and hands on support throughout the life of each project. Interest rates typically range from 4 to 12% APR.

How long does it take to get a loan?

We have streamlined and automated the loan application process so that borrowers can sign up and upload all documentation right on our website. Once terms have been agreed upon and the loan approved, the duration of the settlement process depends on several factors including which title company is used and how quickly documents are turned around. But, typically, it takes between 12 and 15 days to close on a loan. 

What fees do you charge? 

As part of the loan process, borrowers pay for an appraisal of the property, the price of which varies based on property and loan type. This fee is paid directly to a pre-approved appraisal firm. In addition to the closing points, there are also limited fees for underwriting, document preparation, and services. Borrowers should keep in mind that we require a Builder’s Risk insurance policy to be in effect during the life of the renovation project. The fees for this policy will vary. In addition, throughout the life of the project, NavCap assesses a $250 fee for each inspection/draw request for single-family units and up to $1000 per inspection/draw for multi-family properties. We recommend limiting draws to three or fewer per project to reduce the expense incurred. 

What happens after I submit the Proof of Funds and have the property under contract? 

Your next steps would be to fill out the pre-application and, once we've determined if the numbers make sense, then a full application. There is also supporting documentation that needs to be submitted with the full application. These are listed on our website as well.

We will send a conditional letter of approval once everyone has agreed to all the terms. Once your offer on the house has been accepted, and you have a ratified Contract of Sale and Scope of Work, the appraisal will be triggered. There are non-refundable fees for the application and the appraisal. 

What is a Scope of Work, and why do I need one? 

When it comes to house flipping, it pays to have a plan. As any successful flipper will tell you, a good Scope of Work (SOW) estimate is critical to the success of any reno project. It establishes the parameters of the renovation from start to finish. The SOW is a detailed document that describes the repair work that needs to be done to make the house sellable. It should include an overview of the project as well as individual line items of the work necessary to complete the job. As a starting point in the process, we have created a sample SOW template, available for free download from our website.

How much money do I need to bring to the table? 

When we invest in a project, we make a commitment to the borrower to do everything in our power to ensure its success. We expect our borrowers to be equally committed and, to that end, require that they have sufficient funds on hand to begin the first phase of the renovation. Typically, borrower cash outlays amount to a minimum of 10% of the loan amount for purchases and sometimes less for refinance loans. As you might expect, the more money borrowers are able to bring to the table, the more competitive a rate we can offer. For our clients with considerable experience and good credit, we offer the most flexibility on both our rates and cash requirements. 

Are there any environmental assessments or site inspections that are required before my loan is approved? 

 In order to avoid any costly surprises, we do have several requirements when it comes to environmental issues. It has been our experience that properties that rely upon private well and septic systems pose the greatest financial risk to investors. 

Therefore, loan applicants for properties with wells must provide us with the results of a Well Water Flow Test & Basic Chemical Well Test Analysis. The chemical test should measure levels of Iron, Nitrite, Nitrate, Bacteria, Chlorine, pH & Turbidity (Radium and Lead are highly suggested but are at the discretion of the buyer). Beyond these analyses, we strongly recommend that the buyer obtain a salt water intrusion test to ensure that the well shaft has not been compromised. If it has, then, unfortunately, a new well must be drilled. In all cases, laboratory test results must be submitted with the written inspection report.

For properties with septic systems, we require inspection by a licensed septic/septage inspector. Inspection MUST include a written report detailing tank construction material as well as the condition of the tank (including age if determinable), baffle(s), and drain fields. Inspection of the drain fields must include pick/auger inspection of all fields. Applicants must also have a Water Surge/Flow Dye test performed at the property (which requires that water be turned on at test time). Photos (and video if available) are to be included in the written inspection report.

 NavCap’s approval of your loan will depend upon satisfactory well and septic test results. If any results are unsatisfactory, you must budget for repair or replacement of the failed system in your scope of work OR negotiate repair or replacement from the seller. Ensuring that a prospective property's well and septic systems are operating properly is key to a smooth sale and successful rehab. 

What if the property being financed has public water and sewer? Are any environmental assessments required?

For properties on public water and sewer, NavCap does not require any tests or inspections. However, we should point out that there is still some risk involved here. With every purchase, there is always a chance that there is a leak in the water main or elsewhere within the plumbing system. To avoid potential problems down the road, we recommend turning on the water prior to purchase. After purchase, any repairs to the water main will be the buyer’s responsibility and should be reflected in your scope of work.

We also strongly recommend that our clients arrange for termite inspection of the investment property prior to purchase. By doing so, any future liability when the home is finished and sold is avoided. It has been our experience that as part of the final sales contract the buyer automatically assumes that if there is termite damage the seller will without negotiation be liable for 2% of the contract sales price.

What is builders risk insurance and why do I need it? 

Basically, builders risk insurance protects property that is under construction and is sometimes referred to as ‘course of construction’ insurance. It is a specialized type of insurance policy that begins when the construction or repair work starts and ends when the project is finished and ready for sale or occupancy. 

Although there is no standard builders risk policy as every project is different, most coverage includes property loss due to fire, lightning, hail, explosions, hurricanes, theft, and vandalism, among other risks. Most policies exclude damage from earthquakes, floods and wind and require special coverage extensions for these risks. Other standard exclusions often include ordinary wear and tear, acts of terrorism and war, employee theft, rust and corrosion, mechanical breakdowns, and damage resulting from faulty design, planning, workmanship and materials. 

We should note that, here at NavCap, we require all of our borrowers to obtain All Perils special coverage which covers losses from windstorms and, in certain coastal areas, hurricanes. This will be on top of the standard builders insurance policy. We also recommend that our borrowers request coverage for water damage from faulty plumbing or construction-related issues. 

And as far as coverage goes, we require a policy that covers 100% of the insurable improvements on a replacement cost basis. This means, basically, that your policy should allow for the repayment of your loan amount in full. Typically, the cost of a builders risk policy can be anywhere from 1 to 4 percent of what is budgeted for construction. For more details about policy specifications, refer to this downloadable form in our loan documents. 

Here at NavCap, we are always looking out for our clients’ best interests. So we require a builders risk policy on every project we finance, no matter the location or size. We know that things happen, and we want you to be prepared for the unexpected. A good builders risk policy that insures the structure, materials on site and in transit, as well as labor and equipment will go a long way towards ensuring your project has a good outcome—no matter what. Contact your local insurance broker for quotes.