First Funding Blog

What is Advance Rate? Is this the interest rate on the warehouse monies advanced?

The advance rate is generally considered to be the amount that the warehouse lender is willing to advance on a given loan. It is usually expressed as a percentage of the loan amount. For example; a warehouse lender willing to fund $198,000 for use in the closing of $200,000, the warehouse lender is said to have an advance rate of 99% ($198,000 /$200,000 = 99%). Most warehouse lenders will specify an advance rate in an amount less than 100%. This is to ensure that the originator has some investment in the loan to be warehoused. The difference between the Advance Rate and 100% of the loan amount is usually referred to as the “haircut.”