7 Simple Steps to Get Approved for a Conventional Real Estate Loan

7 Simple Steps to Get Approved for a Conventional Real Estate Loan

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Brandon Turner

Brandon Turner is an active real estate investor, entrepreneur, writer, and podcaster. He is a nationally recognized leader in the real estate education space and has taught millions of people how to find, finance, and manage real estate investments.

Experience
Brandon began buying rental properties and flipping houses at the age of 21. He started with a single family home, where he rented out the bedrooms, but quickly moved on to a duplex, where he lived in half and rented out the other half.

From there, Brandon began buying both single family and multifamily rental properties, as well as fix and flipping single family homes in Washington state. Later, he expanded to larger apartments and mobile home parks across the country.

Today, Brandon is the managing member at Open Door Capital, where he raises money to purchase and turn around large mobile home parks and apartment complexes. He owns nearly 300 units across four states.

In addition to real estate investing experience, Brandon is also a best-selling author, having published four full-length non-fiction books, two e-books, and two personal development daily success journals. He has sold more than 400,000 books worldwide. His top-selling title, The Book on Rental Property Investing, is consistently ranked in the top 50 of all business books in the world on Amazon.com, having also garnered nearly 700 five-star reviews on the Amazon platform.

In addition to books, Brandon also publishes regular audio and video content that reaches millions each year. His videos on YouTube have been watched cumulatively more than 10,000,000 times, and the podcast he hosts weekly, the BiggerPockets Podcast, is the top-ranked real estate podcast in the world, with more than 75,000,000 downloads over 350 unique episodes. The show also has over 10,000 five-star reviews in iTunes and is consistently in the top 10 of all business podcasts on iTunes.

A life-long adventurer, Brandon (along with Heather and daughter Rosie and son Wilder) spends his time surfing, snorkeling, hiking, and swimming in the ocean near his home in Maui, Hawaii.

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Brandon’s writing has been featured on Forbes.com, Entrepreneur.com, FoxNews.com, Money Magazine, and numerous other publications across the web and in print media.

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Getting a conventional loan is not a complicated process, but there are a lot of moving parts. Allow me to give you a quick summary of the entire process, so you’ll best know what to expect when getting your loan.

7 Simple Steps to Get Approved for a Conventional Loan

Step #1: Shop

When shopping for a conventional loan, I recommend beginning your loan search before you get your property under contract. After all, the bank needs to approve both you and the deal before lending, so you might as well get the first half of that equation out of the way to make sure you aren’t wasting anyone’s time. It would be best to know before shopping for a deal whether or not your credit score is high enough to secure that deal!

Start with the bank that you already have your primary checking account with. Schedule an appointment with the loan officer, and actually sit down with them. Ask them what kind of loan programs they have for rental property loans. Ask them the rental property loan amounts they typically lend on, the current interest rates, the term, and any other information. Have the same conversation with three or four other lenders in your area, and be sure to mix it up between banks, credit unions, and mortgage companies. Once you have the basics from each company, pick one and get pre-qualified.

man with blue geans and sneaker shoes in stair

Step #2: Pre-Approval

Getting pre-qualified means getting a conditional “yes” from the bank before you even find a deal by bringing in all your financial paperwork. In other words, the bank approves you before they even see whatever property you hope to buy. Now, of course, the deal will need to make sense to them, but getting yourself and your financials approved is the most difficult part.

Of course, it’s possible to skip the pre-approval and just bring a deal and your paperwork in, but when you’re hunting for a killer real estate deal, this pre-approval can help a lot.

Step #3: Submit the Property Information

Once you find your deal, it’s time to get the second half of your approval equation started: the approval of the property. The lender will require you to submit (or have your real estate agent submit) information about the property, most likely the P&S agreement. The lender may also want to see additional documents from you if it’s been awhile since you got pre-approved (such as updated pay stubs and bank account information).

Related: The Private Loan Source Perfect for Growing Your Real Estate Portfolio

Step #4: Loan Goes to Underwriting

When all the information has been gathered, it is sent to the lender’s underwriter, who will give the final “yes” or “no” on the loan. It’s likely that during this time, the underwriter will make you jump through numerous hoops before giving you the loan. In the next chapter, I will go into more detail on this process and how to ensure that you get a “yes.”

Step #5: Lender Issues an Appraisal

The lender will likely hire a residential real estate appraiser to give them a valuation of the property. The lender’s goal, of course, is to be secure in their investment, so they want to make sure they are not loaning more on the property than they should (and also that the property is in good enough condition for them to loan on). A typical single-family house appraisal will cost approximately $400, while a small multifamily appraisal might cost up to $1,000. If you are buying a commercial property, expect to be in for at least $4,000. This appraisal cost is not generally fronted by the lender, but you will be required to pay this before the appraiser will go out.

This, of course, is to protect the lender from spending money on an appraiser and then having the loan not go through.

conventional loan

Step #6: Loan Goes Back to Underwriting

After the appraisal is complete, the underwriter once again reviews all the documents for the property, including the information just obtained in the appraisal, and decides whether or not they want to take the risk of lending to you. They may, once again, ask for you to jump through certain hoops. For example, I once had an appraiser require that the gutter down-spouts on a property have “splash blocks” installed before they would issue a “yes” on the loan. They also, again, may want to see more pay stubs or other financials from you. Just get them what they need, and do it as quickly as possible. The biggest delay in the underwriting process is usually the borrower needing to get paperwork to the lender, so don’t be a clog in your own pipe! Ultimately, underwriting will either approve or deny the loan.

snowyunitsRelated: Having Trouble Getting a Loan for an LLC? We’ve Got You Covered

Step #7: Loan Closes

If the loan is approved, the bank will let you or your real estate agent know. The title company or attorney will also be informed, and closing will take place soon after. At the closing table (typically at your title company or attorney’s office), you will bring a check for the down payment, and your lender will wire over the funds for the purchase. The title company or attorney will take care of the paperwork, and you’ll be the owner of a new property.

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Any questions about the process? Anything you’d add?

Comment below!