How To Get Qualified for Hard Money
How to get qualified for hard money is common interest for real estate investors. Hard Money can be a valuable tool for real estate investors. It’s fast, easy, and provides you with incredible leverage. Investors have learned to love the fact that you can obtain up to 100% financing. Finding this type of financing is easier than you think! Here are 7 things to be aware of when learning about how to get qualified for hard money.
1. Do your research!
Understand what each hard money lender is offering and check their references! Don’t be afraid to ask tons of questions. Find out what kind of terms they offer. Find out what all of their fees are for the loan and to possibly extend the loan should you need it. Ask about how long it would take to close, up-front fees and inspection fees for repair draws. Don’t be afraid to shop around!
2. Apply for the loan.
The documents needed for each type of loan are different. To pre-qualify for a hard money loan
, the borrower must turn in an application, current bank statement to show their current liquidity, ID, an itemized repair budget (when available), and an executed contracted (when available.) To pre-qualify for a rehab to perm loan, the borrower must turn in an application, current bank statements, 2 years’ tax returns, most recent pay stub, most recent IRA/401K and a credit authorization. Noble Mortgage can pre-qualify you for the permanent loan up front so as soon as the repairs are completed we can refinance the loan. Make sure you are qualified for a take-out loan before you close on the hard money! (Check out this short video that explains why it’s important to get pre-qualified!)
3. Have an exit strategy.
Great! You found a property. Now what? Are you going to flip it? Are you going to buy and hold? Your hard money lender will lend you money based
on your intention with the property. Noble Mortgage will lend up to 70% of the ARV (After Repaired Value) for a flip and up to 75% on a rehab to perm. Keep in mind if you are going to keep the home as a rental then you will need to qualify for a “take out” or “permanent” loan to refinance the short-term hard money loan.
4. Find the right deal.
Finding the deal is always the hardest part. Keep in mind that even though it says “the right
deal,” everyone’s definition of a good deal is different. There are multiple ways you can obtain a property. Within your local area, there are a great deal of bird dogs and wholesalers. Find them and get on their buyer lists! If you don’t want to use that avenue, market yourself! There are multiple ways to acquire properties: mailing lists, bandit signs, door-to-door, and/or cold calls are just some examples. Lastly, understand due diligence. The numbers need to make sense according to your plan with the property.
5. Get an Inspection/repair estimate
If you are new to investing having a licensed home inspection can save you a lot of headaches and money. The inspection will allow you and your contractor to more accurately estimate the repairs needed on the home. If you can arrange it bring your contractor along. If you’re rehabbing a property, make sure your contractor understands your intent with the property. The finishes on a home to be flipped and different than that of a home to be held as a rental. Find a contractor that knows investing and has a fast turnaround with competitive prices.
6. Start making offers!
Now that you have your financing in place you can start making offers. What’s holding you back? It’s so important to “pull the trigger.” Get the property under contract, complete the project, and sell it (or keep it for that cash flow.) Sometimes you will have to make dozens of offers to secure the right deal.
7. Lastly, continue to educate yourself about real estate investing!
Hard Money is a great tool for investing; however, it doesn’t work for every deal. Educate yourself on all the different types of financing. You’d be amazed at how creative the money side of investing can be! Have more questions? Call Noble Mortgage! We’d be happy to help you in the best way that we can.]]>