Blog

Advance Rate

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.”