Pre-Approval for Financing

[Logan Splinter]

Hey BP! Thanks in advanced for all the responses! I greatly appreciate everyone's insight and help. It is ultimately going to be a big factor whether or not i am successful or not.

I'm looking to get pre-approved for financing so i can actively start searching for my first BRRRR deal. I'm leaning towards using a hard money lender to start for i don't have enough cash to fully invest in a property, (I could cover the rehab portion if need be) and i do not have enough connections yet to start raising private capital. So i ask,

Hard Money Lenders

1. How does the pre-approval process work for hard money lenders? What do they need, what should i look into before i get pre-approved, what should i watch out for if anything, and how will this process impact ones credit score? Lets say i do not have a property i'm actively looking to buy yet, but i am looking to get pre-approved to see my budget.

Refinancing the BRRRR

1. Can you get pre-approved for the refinancing part even if you don't have a deal yet? If so, how would one go about doing this? Whether you can or can not, when should you look into completing this step of the process. 

Bare with me i am new and i have a lot to learn lol. I have never been through getting a loan like this before so i have questions! 

[Mark Safrin]

Hard Money loans generally have the highest interest rates, points on closing and various fees. They also tend to have minimum loan sizes.  You can get a piece of paper preapproving if that makes you or the seller feel better.

What many people do is they contact the HML before they close and say I am considering a property at address X. I will probably purchase it for Y. Its existing value is, in my totally unbiased opinion, probably Z and after have rehabbed it for AA$ it will likely be worth BB$. My credit score is CC and I have done DD rehabs/flips before. What can you do for me?

The HML is will usually be happy to briefly ention what he has to offer. The process up to this point can take 5 mins.

(Our regular, repeat flipping clients don't bother. They simply send in a loan application form knowing from previous loans what to expect. )

You can do this with more than one HML. Since the maximum loan size is a percentage of current worth (plus rehab money if any), the actual loan size that will be lent to you will generally only be known once an appraisal is done. So it's best to have extra reserves of cash in case your estimate of it's current worth and a professional appraiser's differ greatly.

You will still need a deposit for the purchase for what the loan doesn't cover and depending on the loan size perhaps $10k for closing and various other costs.

Networking in person at meetups is always a neat idea if it's possible. You get to know them in person and them you. They will often have some literature on what they offer. Personally my future goodwill can usually be assured with a glass of fine single malt... :)

As to whether there are better options than HML, that is up to you. Most people that go for HML do it either because they do not have the income or other qualifications needed by conventional lending sources or said lending sources might take months to close and you need a bridge loan for cash for that closing in a few weeks.

Best wishes.