Fix and flip loans are salvation to flippers, contractors, and developers. They are a quick source of money for renovations and construction. If you want the money to make turnarounds from when you buy a house, flip it, and sell it, you must avoid some common mistakes. These pitfalls are the reason why your application is denied over and over.
Since these loans are different and straightforward to obtain, people often overlook some important detail and factors. Before you apply for a bridge loan, peruse the slip-ups you need to avoid as well as why your loan application has been denied.
1. Lacking a Prequalification
Prequalification is among the first steps when you are buying a home. When you prequalify, it means you will have an estimate of the amount you can borrow and a passed credit check. Lenders are pleased with flippers and investors that have a prequalification letter. Not only will you have a good standing, but you also have an expedited hard money loan processing.
Liquidity is also a vital factor when borrowing money. If the property can sell fast when you list it, then the chances of getting a bridge loan increase. Preapproval gives you the cash to start your project when your loan application is pending.
2. A Bad Relationship With Your Lender
Dealing with a private lender is nothing close to dealing with a bank. With Atlanta hard money lenders, you need good communication and a steady relationship. The more the lender is familiar with your flipping or the developing project, the more insight they get. They will have more trust in your project.
Additionally, a good lender-borrower relationship gives you access to tips and networks. Your private lender probably has better knowledge of the industry and trends. Hard money loan lenders can advise on properties and projects within your area.
3. Missing or Improper Information
Getting a loan for real estate with lacking details or misinformation will only make it harder for you. Lenders will ask for a lot of personal and financial information, depending on your project’s purpose and property value.
Your earning statements and tax returns will help speed up your application. Also, draft up a letter stating your financial standing and the intent of your real estate project. If you are unsure about the criteria, as the hard money lender for a list of required documentation.
Reasons Why Lenders Decline Your Hard Money Loan
Lacking enough equity in real estate property is one of the top reasons lenders deny applications. Besides that, lenders only want to help you purchase the property, not lend you the full amount. Therefore, invest at least 25% of the price or be ready with a hefty down payment.
Next, you might miss a bridge loan if you do not have an exit strategy. To avoid this, ensure you have a strategy that will clear and loan balances. For instance, you can sell the current property, sell a previously-owned property, or refinance with another loan.
Finally, missing monthly payments is another cause for rejected hard money loans. As private lenders are lenient with credit scores and short sales, you need to prove you are worth the loan. Contact Hard Money Georgia today for Atlanta private lending experts!