Beginner - hard money loan: what comes first?

Question

I’m eager to find my first deal - I was planning to use a hard money loan, and they obviously need a deal in hand to finance, but I was hoping to already have financing to show to the seller with the offer. What’s the best order of operations here? Any thoughts/suggestions appreciated!

Michael Glist · Answer

So as mentioned you will want to talk to a hard money lender and get pre=approved. Most hard money lenders can and will offer a pre-approval letter and/or a proof of funds letter. As mentioned if you are looking to just do a flip then you are good to go, but if you are looking to turn it into a rental you will also want to get pre-approved for the long term financing as well. Some lenders will require you to be pre-approved for that as well to ensure there are no issues when it comes to paying off your short term hard money loan. This is also important because the guidelines for a conventional loan are a lot different than that of a short term fix and flip loan. If you do not qualify for a conventional loan for whatever reason there may still be options such as a DSCR loan which is more flexible than a conventional loan.

I hope this helps. If you have any questions or need any clarification on anything I mentioned feel free to reach out.

Sean Blomquist · Answer

@Kevin Owen great question.  I would reach out to a HML to apply and get preapproved before finding a deal.  If you plan is to flip, you are good to go.  If you plan to BRRRR, you will also want to talk to a conventional lender for the refinance piece as well.  Good luck!

Greg Scott · Answer

Find a hard money lender that works closely with a conventional lender. (You want to get out of the HML into conventional as soon as possible.) Get your pre-approval letter from the conventional lender.

Beginner - hard money loan: what comes first?

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