Sign Under Contract

[Myla Bravo]

Private or hard money lenders are asking whether the deal is “under contract.” Why do they require this? I’m hesitant to sign a contract because I don’t yet know if I’ll be approved by a bank, hard money lender (HML), or private money lender (PML). What steps should I take before signing any contract, and what questions should I ask? Since HMLs and PMLs typically require a property to be under contract to begin the process, how can I proceed with them without having an executed contract in place?

[James Mc Ree]

A realtor can pre-qualify you for your mortgage with their in-house lender. The pre-qualification can then be used when you make your offer to show you are likely to get traditional financing. It doesn't really mean anything other than a lender determined there is a reasonable chance this borrower would get a mortgage. It is not a guarantee.

I ran into the same challenge with DSCR lenders. Traditional realtors and home sellers are accustomed to receiving the prequalification assurance with an offer which makes an offer without one especially weak. I talked with my 2 lenders about getting a prequalification letter. They said DSCR lenders simply don't do them. I don't recall if they said why. I ended up buying with cash, then doing a DSCR cash out refi. That's only 2, so there are many more and maybe some will provide something like a prequalification letter.