Frequently Asked Questions
What is CoreVest and what do you do?
CoreVest, (a Redwood Trust company), is a direct lender specializing in residential investmentasset finance. We provide financing solutions to residential real estate investors of all sizes. We provide attractive long-term debt products for stabilized rental portfolios, as well as credit lines for new acquisitions.
What kind of loan products do you offer?
We offer low-cost term loans to finance stabilized rental properties and flexible bridge loans for short-term investment strategies. For an overview of our products, click here.
What property types do you lend on?
We lend on single family homes, condos, townhouses, 1-4 unit residences and small multi-family assets.
Are you a hard money lender? Mortgage Broker? Residential Lender?
No. We are a private, direct, and/or specialized lender.
What is the difference between a CoreVest investment loan and a residential home loan?
We are a commercial lender that provides financing for businesses that invest in non-owner occupied residential properties. Our borrowers use the proceeds from our loans to finance their real estate businesses whereas residential home loan borrowers use their proceeds to finance their primary residence.
Do you report to the credit bureaus?
No. We are a commercial lender.
How long does the process typically take?
• Term: Generally, our term loans close within 30-45 days. We are prepared to move as quickly or slowly as the borrower is comfortable.
• Bridge: Our bridge financing, or lines of credit, typically require a 30 day underwrite, at which point a credit commitment letter may be issued. Once a specific asset(s) is under contract, the underwriting, appraisal, and funding process takes 7-10 business days.
What states do you lend in?
CoreVest is a nationwide lender. We lend in most major, secondary, and tertiary markets across the 50 states. Loans in Nevada (license pending) and Minnesota (license pending) need additional approval. For the most current lending status, visit https://www.corevestfinance.com/where-we-lend/
Do you lend to Foreign Nationals?
Yes, we offer non-recourse options with soft cash management up to 65% LTV that work forforeign nationals who can provide appropriate documentation. We will require US-based banking and property management. The international investor must also register with the IRS and provide a I-TIN number (via W-7).
Do you have a seasoning requirement?
• Term: No, but portfolios held (in aggregate) less than 1 year will be capped at 90% of total cost.
• Bridge: No seasoning requirement for LOC assets.
Is there a Prepayment Penalty?
• Term: Yes, our terms loans require yield maintenance. On our 5-year note, there is 54 months (4.5 years) yield maintenance. On our 10-year note, there is 114 months (9.5 years) yield maintenance.
• Bridge: No, there is no prepayment penalty on our lines of credit.
Are CoreVest Term Loans Assumable?
For loans over $5 million, there is a one-time right for a purchaser of a portfolio to assume our debt, so long as they meet certain conditions including payment of a 1% fee and approval by the underwriting department. Loans below $5MM need exception approval to have this feature included.
What kind of real estate experience is needed to qualify?
Our borrowers range from those who have fixed and flipped a couple homes to those who manage hundreds of rental properties. We have loans tailored to different borrower experience levels and funding needs.
Do you finance personal residences (owner-occupied), manufactured/mobile homes, co-ops, vacation rentals (including Airbnb/VBRO), student housing, assisted living facilities, mixed-use, or commercial assets?
Will CoreVest Finance Mixed-Use or Commercial Assets?
No, we can only finance residential investment assets (SFRs, Small Multi-Family, Townhomes, and Condominiums). We will not consider mixed-use assets (e.g. residential with a retail component). Larger large apartment buildings could be financed but there is much better debt available through other lenders. We also will not finance owner-occupied residences, mobile or manufactured homes, or co-ops.
Do I need a Special Purpose Entity for my loan?
Yes. Because we are a commercial lender, you will need a Special Purpose Entity (typically a Limited Liability Corporation, or LLC) for your loan. If you don’t have one, no need to worry—it is typically a very straightforward process and our team can assist you.
Can I obtain a rental loan for properties that are not currently leased?
Our Rental Loans are for stabilized rental properties with leased homes. Typically, this means that nearly all homes are leased or in the process of being leased when the loan closes. Several of our borrowers take advantage of our Bridge Loans to purchase and aggregate properties until they are mostly leased and can be financed with a Rental Loan.
Do you lend to foreign nationals?
Yes. Foreign nationals are an important part of our business.
Do you have minimum credit scores?
In general, we do not have a minimum credit score threshold. Instead, we look at a borrower’s overall credit profile, track record and liquidity.
How do borrowers get started?
Do you work with brokers?
Yes, we work extensively with brokers and are always looking for new relationships. We have partner programs that enable brokers to earn meaningful compensation.
How do brokers get started?
Do you offer non-recourse loans?
Yes, we offer both recourse and non-recourse Rental Loans. Recourse loans are guaranteed by the individual or operator. Non-recourse loans are secured only by the underlying real estate of the borrower, with certain exceptions such as such as fraud and bankruptcy.
Asset-Based Lender? What Does That Mean?
We are asset-based lenders, meaning we look at both the asset’s current market value (confirmed via appraisal) and the cash flows generated (rents). Our rates are based on leverage. We price at either 60, 65, 70, or 75% LTV. When coming to initial terms, we provide financing based on the lessor of 75% LTV or 1.20x DSCR. LTV is pretty straightforward. We typically are limited by debt service. Simply stated, a 1.20x minimum DSCR (debt service coverage ratio) means we are looking for the portfolio to generate 120% of the monthly principal and interest payment, so worst case scenario, the portfolio can support its own payments (with some additional cushion) without any additional cash out of pocket from the borrower. We often run into debt constraint limitations when assets are of high value relative to monthly rents or assets report high expenses (taxes/insurance/HOAs). For example, a $200k asset rented for $1,500 has stronger underlying operating fundamentals than a $750k asset renting for $3,000 a month.
Can I use my credit line to purchase in multiple states?
Yes. Many of our borrowers take advantage of this feature.
Do you do finance rehab expenses and ground up construction?
We finance certain rehab expenses under our Fix and Flip Bridge Loans. We also offer Ground Up Construction loans to qualified investors.
What is a Debt Service Coverage Ratio (DSCR)?
The debt service coverage ratio (DSCR) is the relationship of a property’s annual net operating income (NOI) to its annual mortgage debt service (principal and interest payments). For Rental Loans, we use DSCR to determine how large of a loan can be supported by the cash flow generated from a borrower’s portfolio.
What is Loan-to-Value (LTV) and how is it used to determine the proceeds of my loan?
Loan-to-Value (LTV) is the relationship of the size of the loan to the current value of the properties supporting the loan. We use LTV to determine the size of a Rental Loan and the advance proceeds for Credit Lines.
What does Yield Maintenance mean and how does it work?
Yield maintenance is a form of prepayment penalty that only applies if the borrower pays off the loan before a predetermined date. If applicable, the payment due is the present value of remaining future interest payments over the balance of the loan term.
Do your loans amortize?
Most of our Rental Loans amortize based on a 30-year schedule. We also have Interest Only options available.
What is the minimum number of properties needed for a Rental Portfolio Loan?
For our Rental Portfolio Loan, we require a minimum of 5 properties. We also offer a single asset rental loan on individual properties.
What is the minimum amount I can borrow?
Depending on the loan product, we require different minimum amounts. Click here for a product overview which shows the minimum and maximum amounts for each product.
Are your interest rates fixed or floating?
We offer fixed interest rates on all products.
What happens to the outstanding balance on the maturity date of the loan?
The outstanding balance is due at the maturity date. This is often referred to as a “balloon” payment. Contact us to discuss the different options.
What are your insurance requirements?
We have state specific insurance requirements for both property and commercial liability. Contact us for specific requirements regarding your portfolio assets.
What is Yield Maintenance?
Yield maintenance only applies to the term, portfolio finance product. Being that CoreVest intends to securitize the notes on the CMBS market, yield maintenance in necessary to ensure returns to our bond investors. If one were to repay within the yield maintenance period (5-year, 54 months; 10-year, 114 months), the borrower would still be responsible for the accrued interest over the remaining life of the loan. This is a non-negotiable aspect of our finance platform.
Assumptions: $1,000,000 loan, 5-year term, 6% coupon, 54-months yield maintenance. If one were to sell one asset from the pool after 2 years, the asset would be subject to a (1) 120% release clause and (2) yield maintenance.
1. 120% release: borrower pays down 120% of the balance on the “disposed asset” to
accelerate the pay down of the principal. This is to ensure we are not left with the
lowest quality/value assets in the event of a “strategic default.” e.g. total outstanding balance: $1m; Sold Asset Value $100k; 75k financed, $90k repaid ($75k x 120%); remaining loan balance is $910k. Ultimately, 100% of balance is repaid (not 120%).
2. Yield Maintenance: selling off one asset ($100k value) after two years, would be subject to yield maintenance (60 months total – 24 months elapsed = 36 months’ yield maintenance for 1 sold asset). Calculated interest rate is based on the difference between the coupon (6%) and the treasury at the time of prepayment (6/20/2016-
1.13%… but 6/20/2018…?). E.g. 6%-1.113% = 4.87%. Therefore, the yield maintenance prepayment penalty would equate to 36 months (remaining) of interest at 4.87% (hypothetical).
Do you require reserves?
For Rental Portfolio Loans, we require reserves for taxes, insurance and capital expenditures.
What is your turnaround time for an application?
We usually respond back to potential borrowers with a term sheet between 2-7 days.
How long will it take to close my loan?
Most of our Rental Loans close within 4-6 weeks. Our Bridge Loans typically close within 3-4 weeks.
Can I manage my own properties?
Yes. Borrowers can self-manage their own properties or use 3rd party property managers.
Can I choose my own title/escrow company?
Yes. We try to close transactions as quickly as possible. Often, this means we will work with borrower title/escrow companies.
Together We Grow
CoreVest continues to grow with our borrowers and remain active participants in the industry