Flipping houses can be an extremely lucrative business if you know what you’re doing. However, you need cash to get started – purchasing a property plus supplies for renovations can easily cost hundreds of thousands of dollars. Unless you have that kind of money just lying around, you’ll likely need to finance your flip through a loan. According to Investopedia, experienced real estate investors may qualify for fix and flip loans for up to 90% of the purchase price and 100% of renovation costs to experienced real estate investors. Here’s everything you need to know about qualifying for them.
Get Your Credit In Order
Before applying for a fix and flip loan, the first thing you need to do is check your credit score. Most fix and flip lenders will want to see a credit score of at least 600 before they’ll consider lending to you. If your score is lower than that, spend some time boosting it before you apply. Pay all bills on time, pay down balances, and correct any errors on your credit report. This will help improve your score and show lenders you’re financially responsible.
Research Lenders Thoroughly
There are many types of lenders that offer fix and flip loans, from big banks to small private lenders. Make sure to research different lenders thoroughly, as loan terms and requirements can vary widely. Some things to compare are loan amounts, interest rates, loan-to-value ratios, fees, and more. Also, look for reviews from past customers regarding ease of application, closing times, customer service levels, etc. Taking the time to carefully vet different lenders will help you find both the best loan product and lender fit.
Have Your Documents in Order
To qualify for a fix and flip loan, there is quite a bit of documentation you need to provide. This includes things like bank statements, tax returns, rehab budgets and plans, comparable property valuations, and much more. Gather everything together ahead of applying so your loan process goes more smoothly without delay. Being organized also conveys to the lender you are responsible and can successfully execute the flip.
With proper planning and preparation, you can absolutely qualify for financing to fund your house flip. Do your homework, get your credit and documents ducks in a row, and find a lender offering loan terms that work for your situation. If you put in work on the front end, you’ll have access to the capital needed to get started bringing an outdated home back to its full potential. If you’re looking to qualify for fix and flip loans, call us today to start the process.