Wait to get Pre-approved?

12 Replies

Hi, my name is Shawn. First-time post, here!

So, I got my real estate license earlier this year, and now I want to get into real estate investing. Particularly rental properties. I do work full-time and have no debt except for my car payment which I have just under $4,000 remaining to pay off. I obviously don't want to look at properties that I won't be able to get, but should I wait until my car is paid off before I get pre-approved? Or would it not make that much of a difference and I should just go to a lender and see what my buying power is right now so I can at least begin looking? I've been throwing more on the car payment to pay it off quicker, as my goal is to purchase my first rental property next year.

Thanks in advance!

Shawn.

I think you should get in front of some banks and see what you could be pre-approved for. $4,000 isnt a lot of debt. As long as you have the income to support it.

Thanks for the reply, Antoine!

I do agree with Anthony, but $4k left with $500 monthly payments would affect your approval amount. A refinance may be in order if you are unwilling to wait. Personally, I feel that being debt free (or at least debt free-er) allows for much less stress as well as the ability to save faster. Also, multiple inquiries won't negatively affect your credit if they occur within a 2 month (I believe) window, but soliciting now and then again later might.
forgive me, Antione. ...the joys of auto-correct.

Hi Joshua! Thanks for your response and input! I did get my car refinanced in the past few years, so my monthly payment isn't nearly as much. And I've been paying more on it (sometimes double) so more is going to principal. It will be paid off in 2018. I have no problem waiting to get preapproved, but I just wanted opinions to see if it would make that much of a difference. I didn't want to wait and it not make too much of an impact than if I didn't wait. I mean, I'm still familiarizing myself with investing, making my goals, and creating my plan. So I have time. I'm in no rush. I want to be smart about it all.

Hi Shawn welcome to BP!

I wouldn’t sweat the car much sounds like you have that under control. I would focus on more the down payment money (assuming you’re using conventional loans from banks). Banks typically require 20-25% down for investment properties and that can be a substantial amount of cash. Definitely go talk to a few mortgage brokers so you can ask the right questions and they can tell you where you stand. That’s exactly what I did when I was getting started and it was time well spent learning about my options.

Good luck!!

Hi, @Ben Freiman ! Thanks for the welcome! I appreciate you responding and thank you for your suggestions! Time for me to start talking to some mortgage brokers!

Find a investor friendly broker/loan officer.... and tell them your situation AND your goals. They'll help you get there from a lending point. I ran all kinds of scenarios through mine to fine tune what I wanted...

@Shawn Wade

Shawn,

Hi.  Welcome to BP.

There are a couple issues here.  

  1. I hope you're doing real estate part time and have a full time W2 job.  Otherwise, you won't qualify for anything because of your recent switch to self employed.
  2. If your car has less than 10 payments and it's not a lease, it won't factor into your debt ratio, so that issue is resolved.  You will need other trade lines though.
  3. If the job isn't an issue and you have the other requisite credit, I'd look into buying units using FHA. 3.5% down, you can use part of the lease income as your own as long as you live in the property.

Hope that helps clarify

Stephanie

@Matt K. , thank you for your response! Yes, I am definitely going to do that. I appreciate you emphasizing situation AND goals. It's good to be understood.

@Stephanie Potter , thank you so much! Yes, I do still have a full-time W2 job and I plan on continuing to work. I am leaning more towards a duplex/triplex and living in one of the units while the other/others are rented. As for trade lines, I do still have a couple credit cards open, but only use them -- one, mainly -- sparingly (i.e. when I need to rent a car if I'm out of town) and pay them off ASAP. I appreciate the welcome!

never wait for information.

you need to know what the bank is going to think of your situation

you need to know what they will expect to close a deal

you need to start building relationships immediately

waiting is going to help none of that. Find a few lenders to tell your story and discuss strategy, they will give you advice, perspective, and education.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here