New York City, NY · Member since 2017 · 247 posts · 123 votes
Hey guys, I'm currently reading and learning about real estate and even though I feel I am still about 8 months away from actually looking for a property I wanted to know, since I might look into conventional financing, would I find the property first and then go to the bank or do I go to the bank and then look for a property?
New York City, NY · Member since 2017 · 247 posts · 123 votes
9y
Thanks fellas. When asking for pre-approval from a bank, what can I expect? I know this is a very specific question but are there any deal breakers I should know about or anything I definitely shouldn't do or should do?
Real Estate Consultant · Cleveland, OH · Member since 2016 · 511 posts · 345 votes
9y
I never let lack of financing get in the way of making a deal. There are plenty of options when finding deals before financing
1) Wholesale. If you cannot get finding find an investor who will take the deal, even if you only make 1-2K
2) Local Hardmoney. If the deal is good, there aren't many HML's that won't take it. I have built up a relationship with one who I know will fund a good deal EVERYTIME.
3) Friends and Family
4) Bigger Pockets!!!!
Finding and recognizing the deal is the most important part of this buisiness. If you find the deal, you will find the money.
New York City, NY · Member since 2017 · 247 posts · 123 votes
9y
Christopher Blanco thanks for that but my question is specifically for someone who decides to go with conventional financing. I want to know what kind of things will get me declined and what kind of things will get me approved. For example, i have good credit and about 15k in the bank and a couple of assets. Besides that what else is the loaner looking for?
Investor · Boston, MA · Member since 2016 · 245 posts · 436 votes
9y
Ronny Tiburcio If you're going to be using conventional financing and looking for deals on the MLS, you will need to have your financing figured out before you start making offers. Almost no listing agent is going to advise her seller to take an offer seriously if it is not accompanied with a pre-approval or pre-qual letter.
As for what the lender is looking for, they are going to measure your DTI (debt to income ratio), run your credit, and likely ask for two years tax returns. They'll use this information to establish a number that you are "pre-approved" for. You mentioned that you will start looking to buy in approximately 8 months.. if I were you, I'd take that time to pay off any debt I had (car, credit card, reduce student loan debt if you can). His will help you make a stronger case to a bank when you walk in and ask for a pre-approval.
New York City, NY · Member since 2017 · 247 posts · 123 votes
9y
Thanks man that was helpful and I will definitely start working on that. Should I look to get pre approved a certain amount of months before looking or should I do it as soon as I think I'm ready?
Investor · Boston, MA · Member since 2016 · 245 posts · 436 votes
9y
Ronny Tiburcio In most cases, a bank will place an "expiration date" on a pre-approval after they issue it to a potential borrower. For example, if you get pre-approved on September 1st, the bank will say that specific pre-approval letter is only good until October 15th. Of course, you can always go back and get another letter, but it would make sense get your pre-approval/pre-qualification right when you want to start looking for a property/making offers. Most banks and credit unions I work with can turn around a pre-approval in just a couple days, so it's a quick process
Rental Property Investor · Salem, NH · Member since 2016 · 460 posts · 276 votes
9y
@Ronny Tiburcio Pre-approval will give you a very good idea of how much you are able to spend on a property. With that said, I found that there is some wiggle room, depending on the type of property, when finding out this amount.
For example, I was originally pre-approved for ~400k but when I found a property that was a little higher I went back and asked for an increase in my limit to 425k. This may not be true for all lenders but it worked with mine as long as the numbers made sense.
Real Estate Agent · Fort Collins, CO · Member since 2016 · 246 posts · 142 votes
9y
I always find a property first. Even if you aren't ready to pull the trigger yet, it's much easier to approach a lender if you have a specific property in mind. If you are going conventional you can always do the pre-approval process before you find a property in order to see if it's a feasible option for funding. However, when I have talked to private lenders it helps to have analyzed the property so that you can discuss terms and different potential exit strategies.
Christopher Blanco thanks for that but my question is specifically for someone who decides to go with conventional financing. I want to know what kind of things will get me declined and what kind of things will get me approved. For example, i have good credit and about 15k in the bank and a couple of assets. Besides that what else is the loaner looking for?
These questions can vary depending on the type of property you're looking for. For example, if you're looking for a multi-family property, they'll want to see adequate reserves in your accounts to ensure stability after the purchase.
Look at it from their perspective; if you were a hard money lender, what items would be red flags to you for someone asking you for a loan?