{"id":60685,"date":"2014-08-24T05:00:08","date_gmt":"2014-08-24T11:00:08","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=60685"},"modified":"2023-05-11T09:46:20","modified_gmt":"2023-05-11T15:46:20","slug":"2014-08-24-4-proven-ways-can-get-loan-flip-houses","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/2014-08-24-4-proven-ways-can-get-loan-flip-houses","title":{"rendered":"How to Get A Loan To Flip Houses in 4 Steps"},"content":{"rendered":"

Nearly everybody I talk to says that “money” is the number one issue that prevents them from getting started flipping houses<\/a>.<\/p>\n

I get\u00a0this question all the time.<\/em><\/strong><\/p>\n

Thousands of people have asked me this in fact through meetups, REIA meetings, on the BP forum<\/a> here as well as well as my own personal email list and blog.<\/p>\n

Personally, I don\u2019t\u00a0like\u00a0traditional financing\u00a0is the right way to fund flips. I\u2019d much rather flip houses with other people\u2019s money like private lenders<\/a>.<\/p>\n

However, if you’re bankable<\/a> and you feel traditional banking is the way to go, then this way of getting a loan for your flip should no be discounted.<\/p>\n

One of my partners at House Flipping School funded ALL of his flips through traditional bank loans…so trust me, it can be done.<\/em><\/strong><\/p>\n

The Truth About Banks and House Flips<\/h2>\n

Of course there are house flipping pros who believe that with the economy still recovering, banks have tightened their restrictions on loans for investors so much that it\u2019s nearly impossible to get a loan nowadays.<\/p>\n

Although private money is how I fund all my flips, if you are a beginner, I recommend that you try\u00a0the traditional bank loan route first.<\/p>\n

Banks ARE in the business of lending money…so keep an open mind!<\/p>\n

Different Kinds of Loans a Bank Offers<\/h2>\n

Take note that conventional mortgages and traditional loans are very different from government backed mortgages. Most banks sell both kinds but they are very different for an investor and potential buy and hold or short-term house flipper.<\/p>\n

Traditional bank loans, other\u00a0than the fact that they are not backed by the government, the entire risk factor for the loan remains with you. Taking out a FHA or VA loan is very different from taking out a traditional mortgage on real estate. Check with your bank on which applies to your situation.<\/p>\n

If you are a first time home buyer and purchase a two-family home, live in one side and rent the other, this is a great way many new investors use to get into their first real estate investment. I know many people who launched their house flip careers doing just that.<\/p>\n

Credit unions and banks will issue you a traditional loan under the assumption that if you default, you will carry the risk. As a result, you’ll need to meet stricter lending requirements and potentially make higher down payments as a result – so this could be cost prohibitive for you if you are short on cash.<\/p>\n

If a large down payment is needed however, you can always get the smaller portion of the cash needed from a hard money lender or private money lender and then use that cash to fund the down payment. Of course you’ll need that cash in hand when you go to the bank.<\/p>\n

Related:<\/strong>\u00a0\u00a06 Wicked Cool Ways To Finance Your Next House Flip.<\/a><\/em><\/p>\n

Suffice to say, there are many options to consider and many combinations of how the money will flow for your flip or investment property, so the idea is to be creative<\/a> and keep an open mind.<\/p>\n

4 Steps\u00a0To Get A Loan To Flip Houses<\/h2>\n

If you go back in history, traditional mortgages were the first mortgages to ever be issued.<\/p>\n

However, mortgage financing is a concept that was developed recently to cater to people who have special demographic requirements and income levels.<\/p>\n

Here are four steps could help you get a traditional bank loan for your house flips.<\/p>\n

1. Check Your Credit Score<\/h3>\n

Banks love people with good credit scores, which is why it is important that you check what yours\u00a0is. Credit scores are like your driving record. They don\u2019t just take into account your present actions; they also take into account your behavior in the past years.<\/p>\n

Related:<\/strong> 4 Ways To Build Your Credit Score Today (Without Spending Any Extra Time)<\/a><\/em><\/p>\n

A credit score is composed of the following:<\/p>\n

Payment history <\/strong>(<\/span>35%\u00a0contribution on the FICO scale)\u00a0<\/span>– how timely you’ve paid bills in the past<\/p>\n

Debt<\/strong> (30% contribution on the FICO score)<\/p>\n