FAQ
“What is Transactional Funding?”
Transactional funding is the term for short term loan you borrow to do a double closing. You use it to buy a property then pay it back from the proceeds of the sales transaction.
These types of loans are based on the entire transaction being set-up in advance. The purchase by the real estate investor, usually referred to as “Side A to B” as well as the resale to the end buyer, called “Side B to C.” Transactional lenders will require that the entire transaction be completed at the same title company. Since bank REO asset managers frown upon their properties being flipped, investors are researching strategies to separate title companies to close the A-to-B side and the B-to-C side of the transaction. Our team in studying this also, and we encourage you call with questions.
What type of transactions will your company fund?
Short Funding, LLC lends on any type of back-to-back real estate transaction including short sales, Bank REO, For Sale by Owner (FSBO), and commercial properties.
We DO NOT fund these items or types of transactions:
- Mobile Homes Transacations
- Non-Real Estate Transacations
- Earnest Money
- Performing or Non-Performing Notes
- Rehab Projects
- Transactions where the party is reselling the property to themselves
Requirements to qualify for Transactional Funding:
- Must have a valid, active contract to purchase the subject property
- Must have a valid, active contract to sell the subject property
- The end Buyer must either purchase with cash or have clear to close from a verifiable lender, if getting financing
- Purchase and subsequent sale must be scheduled as consecutive closings
- Maximum pre-approved funding limit of $1M*
- Must be using a licensed and insured closing company
What is “Dry Funding?” | What is “Wet Funding?”
In the past, it was possible for investors to arrange “simultaneous closings” in creative real estate transactions. In this scenario the investor used the purchase money from the end buyer to pass through to his or her purchase and keep a profit margin in the middle. This is known as “dry funding” because the investor did not need any funds to close the purchase. Because of increased regulatory scrutiny on title companies and “flip” transactions, most title companies do not allow dry funding today. “Wet funding” means that the investor arranges for a short-term loan to fund the purchase and then resells the property to earn the profit margin, using the proceeds to repay the loan.
How much do “Transactional Funding” loans cost?
Transactional Loans are generally less expensive than traditional hard money loans because the risk to the lender is reduced. The price range is 1 to 6 points depending on the amount being borrowed and the length of time the money is used. Many lenders have a flat fee for amounts under a certain threshold. And others charge fees for services that are related to the processing of the loan. For example, an application fee, file review fee, underwriting fee, etc. Be sure to calculate the total cost of your loan, including all fees, when comparing price structures. Check out our Really Simple Pricing Structure
Can I use Transactional Funding for FHA 90 Day Seasoning?
No, transactional funding companies only lend on “flip” properties that close within a short period of time. If you need a loan for a longer period, you will need to utilize a hard money lender.
Can I purchase and borrow funds in my company name?
Yes, you may close using an entity like an LLC or corporation or limited partnership. The loan can also be in your personal name, but only for commercial transactions. You may not use this type of loan for your personal residence. Transactional funding is a commercial lending environment and the rules stipulate that loans be taken as businesses loans.
