Real estate investors evaluate different opportunities every day. If you are relying on one capital source or financing partner, you might be forced to pass on a deal that you would normally want to acquire. One way to avoid this issue is to diversify your funding options. Stay prepared and obtain lending pre-approvals so that you are ready to tackle any opportunity that presents itself.
FIVE REASONS TO GET A PRE-APPROVAL BEFORE YOU SHOP FOR A PROPERTY
- Time Saver: You save time by focusing on investment opportunities instead of lining up capital options.
- Quick: Pre-approval streamlines the buying process and that saves valuable time for real estate investors.
- Competitive Advantage: Investors with pre-approval have more leverage when it comes to haggling with the seller. Sellers may be more willing to lower the asking price, include appliances, cover closing costs or make other allowances to work with a pre-approved buyer.
- Target Data: If real estate investors start by obtaining a pre-approval, they can then sort available properties by price, identify the right neighborhoods, and find the most desirable investment opportunity more efficiently.
- Greater Win Rate: The acceptance rate for offers from pre-approved buyers is higher than those who have not gone through the process.
PRE-APPROVAL FROM A CONVENTIONAL LENDER MEANS DEALING WITH CONSIDERABLE PAPERWORK
Real estate investors who opt for a conventional loan should be prepared to deal with considerable requirements for documentation and paperwork. No verification or no documentation loans are things of the past. Investors will need to gather all of the necessary papers and information before the pre-approval appointment and before they begin searching for an investment property.
To be approved for a conventional mortgage loan, potential borrowers will need to provide specific information to the lender, including:
- Proof of income. Borrowers typically will be asked to provide W-2 statements, recent pay stubs, and tax returns for the past two years.
- Reserves. Borrowers will typically need to provide proof of up to 12 months reserves including closing costs.
- Employment verification. Your lender will not only want to see your pay stubs, but they will also need to verify your employment status and salary. Self-employed borrowers will need to provide significant paperwork concerning their business and income.
- Credit: Conventional loans typically require a higher credit score.
WHY WORKING WITH A HARD MONEY LENDER CAN BE A BETTER OPTION
Hard money lenders can offer a loan process that moves much more quickly than the conventional loan process for real estate investors. Depending on the company, specific requirements for pre-approvals from hard money lenders will vary.
When evaluating hard money providers, search for a lender with the easiest pre-approval processes for investors seeking real estate investment financing. For example, below are the requirements established by Longhorn Investments.
- Proof of income: None
- Financial Reserves: 90 day bank statements ($15,000)
- Employment verification: None
- Credit: 650 middle score
Whether this is your first property or part of a diverse portfolio, establishing a relationship with a customer focused lender is the first step in the loan process.
ABOUT LONGHORN INVESTMENTS
Longhorn III Investments, LLC is a direct private lender offering short term acquisition and renovation capital to real estate investors for both residential and commercial assets. We operate in major metropolitan areas throughout Texas, Missouri, Indiana, and North Carolina. Highlights of our loan program include:
– Up to 70% of ARV (after repair value)
– Finance up to 100% of cost
– Close in 3 – 5 business days
– No income requirements
– Streamlined, simple approval process
– No pre-payment penalty
Longhorn was formed in 2008 and has funded over 1600 loans since inception. Our complementary businesses include a title company and real estate law practice operating out of our corporate office. Our wealth of experience puts us in the unique position of being able to help investors through all aspects of each transaction.