4 Essential Steps on How to Get a Loan to Flip a House
Although traditional mortgages are not my preferred way to fund my flips as I prefer to flip houses with no money using private money, you can learn how to get a loan to flip a house using traditional banking.
Some house flipping pros would say that with tightened restrictions on the banking industry, it's nearly impossible to do it this way nowadays.
However, I highly recommend you go the traditional bank loan route first when you are doing your flips.
So due to big demand on how to get a loan to flip a house, enclosed is a guest post from our friend Trenton Fortes from Mortgage Fit on how to get a loan to flip a house using traditional banking. Enjoy!
Traditional or conventional mortgage loans are a tad different from the mortgages that are backed by the government.
Not only are they not backed by the federal government, but also the entire risk factor for the loan remains on the part of the buyer. Taking out a traditional mortgage on a real estate investment is obviously different as compared to taking out a VA or FHA loan. Especially if you're flipping houses. these loans are even more distinctive.
The banks and credit unions also go ahead and issue a traditional mortgage loan with the assumption that if you default, then the risk is all yours. Now, with higher risk involved in a traditional mortgage, you might as well expect to make higher down payments and meet stricter lending requirements as well.
4 Steps to Help You Get a Loan to Flip a House
If you go by historical data, then the very first mortgages that were issued happen to be traditional mortgages itself. It wasn’t until later that the concept of mortgage financing came into vogue for the low-income buyers or those who happen to have special demographic requirements. Arm yourself with paper, pencil and a loan mortgage calculator and get set to do the needful as discussed below.
These four steps below will help you to get a traditional bank loan to flip a house.
1. Have a look at your credit score: Before you do anything further, the very first thing you should do is check out your credit score at the moment. This is essentially because good credit scores are extremely important for the purpose of obtaining bank finances.
You should have a minimum score of 620 if
you’re looking to get approved, but the interest rates involved aren’t going to be great. The idea is to try to raise your score from a few months before you actually go ahead and apply for a mortgage loan.
2. Have all your documents in order: It’s rather important that you have all your documents in order. It’s also necessary that you get your income and assets verified if you’re looking to get a traditional mortgage loan. Moreover, you need to be prepared to put down the value of at least 20 percent of the value of the house or pay Private Mortgage Insurance (PMI) .
This Private Mortgage Insurance is obviously required by lenders essentially because of the risk of default. Amongst all other documents that you’ll be required to produce include W-2 tax forms, your most recent pay stubs, plus your employment history as well as bank and account statements.
3. Send applications to several places: Once you’ve come to a definite conclusion about mortgage requirements with the help of a loan mortgage calculator, then it’s time you contacted several lenders regarding this.
This is essentially because the terms keep varying across lenders and you might feel that the bank where you conduct your day-to-day transactions isn’t the ideal choice. You should also run a check of the credit unions that are known to offer better rates to their members.
4. Supply extra documents when requested: You’ve got to understand the fact that due to the increasing number of house defaults, lenders are also scrutinizing mortgage requests far more carefully.
For instance, if you’re self-employed you should be prepared to submit copies of your last 2 years’ taxes at least. Massive layoffs have given lenders all the more reason to ensure the fact that you’ve got cash reserves after you’ve bought the home.
How to Get a Loan to Flip a House Conclusion
Keep in mind the above steps when you’re going to take out a traditional mortgage. Make sure you’ve got an approximate estimate with the help of a loan mortgage calculator before you go about doing anything.
As a house flipper. getting a traditional mortgage loan isn’t that difficult provided you do things the right way at the right time.
I'm a full time house flipper who isn't afraid to share information and help upcoming investors. If you have a question just ask. I am happy to help!Source: houseflippingschool.com