Question on making offers

3 Replies

In many of the posts and blogs I've read here there is one thing that isn't super clear to me. I see how people mention that they will get a property under contract then look for a PML or HML. How is it that people are making offers without first having the money or a loan? Are they getting preapproved for a loan only? I ask because it seems like all of the posts I've seen say to attach a proof of funds or preapproval. I'm sorry if I'm just missing something super basic here! Thank you!

@Josiah Collins The first step to take is to talk to a several hard money lenders, learn their rates and get pre-approved. Tell them how much you have on reserves and ask them if it's doable to get a loan based on your cash reserves. They will typically ask for 15-20 % of the total project costs and at least 6 months of mortgage payments to fund your project. The lender should be able to provide you a pre-approval letter which you will use as proof of funds when making offers. 

Keep in mind, the pre-approval letter doesn't mean they will fund the deal for you. It just means that based on your financials, they will fund the deal but they will do their own due diligence on the deal. If they don't believe you have a good deal, they won't fund the deal for you.

I don't know how it works where you live, but here the seller won't even consider your offer without proof of funds or a pre-approval letter from a lender. If you're doing a hard money loan for a fix and flip, you'll need a pre-approval letter from your hard money lender.

@Josiah Collins The buyers could be direct marketing to sellers and making an offer w/o a real estate agent. Then taking the offer to a PML or HML or Bank to see if the financing can be approved.

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