Procedures
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Borrower Registration and Loan Application
- Create a User Profile: The borrower should create a user profile on the EDC website in order to log in to every aspect of the website for full functionality and to get pre-approved and submit a loan application. Creating this profile is critical as it will allow EDC to communicate with you most efficiently.
- Request Funding Letter (if needed by the borrower): If necessary to submit with a purchase contract, the borrower may request a funding letter (to be completed online) in order to receive a loan pre-approval from EDC. The borrower will need to provide a copy of their credit authorization form and their latest tax return to EDC to be pre-qualified and to obtain a funding letter.
- Loan Application: Once the contract has been ratified by the seller, the borrower must submit a complete loan application (on the EDC website). Based upon the information provided in your loan application and obtained on your credit report, EDC may request additional documentation to support your loan application.
Borrower Financial Requirements
- Credit Report: EDC requires a minimum middle credit score of 680 from the borrower to provide a rehab loan to a borrower. In the event that a borrower's credit score is an issue, EDC will allow for co-borrowers so long as the co-borrower is fully qualified. Upon receipt of your loan application, EDC will forward a Credit Authorization Form in order to pull the borrower's credit report. Please return the Credit Authorization Form form as soon as possible in order to expedite your loan closing.
- Tax Return: EDC requires that borrowers provide their tax return for the previous year. EDC will accept signed tax returns from the borrower or we can provide a tax authorization form to allow us to pull the return directly from the IRS if tax returns are not easily available.
- Bank Statements: EDC requires that borrowers provide their last two months of bank statements for loan approval. Retirement account statements should also be provided.
Property Inspection, Contract, and Appraisal
- Purchase Contract: The borrower must provide the purchase contract to EDC. Please be sure to notify the settlement office that EDC will be your lender on this transaction and forward them your purchase contract so title work may begin as soon as possible. You will also want to instruct them to contact our office for loan closing instructions.
- Contractor's Estimate: The borrower must also fax or email their construction estimate/contract to EDC following submission of the loan application.
- Builder's Risk and General Liability Insurance: EDC uses a master insurance policy for all loans and an insurance certificate will be issued to the borrower at settlement. The insurance coverage is obtained by ordering insurance through the EDC website. EDC has established a relationship with Affinity Group Management Co., Inc. DBA Renovators Insurance. Each property will be insured to its full ARV value and borrowers will be listed as the insured party. The cost for the policies is built into the loan. For each loan we require 12 months of premiums to be escrowed. If the loan is repaid in full on or before the escrow has been fully utilized then the balance will be refunded to you. If you refinance your loan, Affinity will work with you to convert your policy to fit your needs.
- EDC Property Inspection: Your EDC Territory Director will be in contact with you to schedule an inspection of the subject property with you to evaluate and review the scope of work and all construction costs. PLease be advised that the EDC property inspection will be ordered once the borrower's financial underwriting has been approved.
- Subject-to-Repair Appraisal: All appraisals will be ordered by EDC for all loans once borrower financial underwriting has been approved. EDC will select the appraiser and instruct the appraiser to contact you to arrange a time to meet at the property. The day of the appraisal, the appraiser will need a copy of your construction plans and specs for the renovations to be completed and collect the appraisal fee at the door. Once the subject-to-repair appraisal is received by EDC, our office will forward a copy of the appraisal to your email address on file. The subject-to-repair appraisal must be received by our office prior to closing. No closings will occur until EDC has received the subject-to-repair appraisal.
After the Purchase Closing - Construction Draw Procedures
- Lockbox: A construction lockbox must be provided on the property for inspection access before any construction draws are received (These lockboxes cost approx. $35 and can be purchased from Home Depot).
- Construction: The investor then proceeds with construction immediately after closing. Please be advised that any changes to the scope of work must be approved by EDC or penalties will be enforced.
- Construction Draw Requests: Construction draw requests must be submitted on the EDC website by 5PM on Tuesday of each week in order to receive a construction draw on Friday. Draw requests will be approved on a weekly basis by your EDC Territory Director only for completed construction items. No construction draws will be approved if the EDC Territory Director cannot access the property. If for any reason the draw is denied or reduced by EDC, the borrower must resubmit the draw request again the following week.
- Construction Draw Funds Availability: Construction draw funds will be deposited into the borrower's account on Fridays subject to the weekly inspection.
Borrowers in the Hampton Roads, VA and Richmond, VA areas will be asked to provide bank deposit slips for an account at Bank of America to EDC before the purchase closing so that EDC can deposit your construction draw checks directly into your Bank of America account.
Borrowers not in the Hampton Roads, VA and Richmond, VA area will be asked to provide EDC with wiring instructions for their financial institution (Wiring instructions to include: Name of Bank, Address of Bank, ABA #, Account #, and the exact name(s) on the account.
- Lien Waivers: Lien waivers must be obtained from every contractor whoever receives payment directly from the investor and must be faxed to EDC (Fax 757-460-4079) every time a lien waiver is signed by the contractor. Lien Waivers will be required in order to process your weekly construction draw requests. Lien Waivers may be downloaded on the EDC website.
Resale or Refinance of Property (Payoff of EDC Loan)
- The closing attorney or title company must request a payoff statement for a loan payoff. The payoff can be easily requested by the settlement office or the lender on the EDC website. EDC will respond with a payoff statement for your loan. EDC has a loan consultant that is available free of charge to assist borrowers with obtaining their refinance mortgages.
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